What Accounting Fraud Means And Its Red Flags
When the accounting fraud is mentioned, it normally indicates that some intentional manipulation has been undertaken on a firm’s bookkeeping records. In majority of the scenario, this is done to give the false impression that suggest that the organization is performing better financially that it really is. Some of the instances where the accounting fraud is quite evident include the merging of a company’s long and short term liabilities for the purpose of painting its enhanced liquity,the overstating of the revenues from the sales, failing to provide the disclosure of investments that are considering as being risky and the understating of the depreciation expenses.
One of the tell tales that some level of accounting fraud is taking place in your organization is when you notice that is an unexplained switch of lifestyle by the staff that work in your finance department. You will find that the staff are in opulent lifestyles that cannot be sustained by the level of earnings that they are getting.
In the event that the figures in your finances are having a certain pattern, this could be a clear indication that accounting fraud is being undertaken by your staff. When specialists are performing the forensic accounting, this is a misnomer that they encounter all the time.
If you discover that the same staff that is assigned the task of undertaking the reconciliation of the firm’s bank statements is also supposed to sign the cheques, that is a red flag that accounting fraud is being perpetrated. It will be a step in the right direction if those tasks are assigned to different members of staff as their sensitive characteristics can facilitate the perpetration of the fraud.
If you notice that one of your workers possesses a controlling personality over others, you must be skeptical about his real intentions. Additionally, such a staff may appear to operate in a secretive manner. In majority of the instances the behavior is a clear red flag that the likelihood of accounting being carried out in your business is high.
The moment that you permit employees who are related to one another to be assigned the duties in your bookkeeping section , accounting fraud could be occurring there. This will not only encourage collusion but the workers will be able to bypass the relevant checks and balances.
When your bookkeeper has the habit of being left behind in the office after hours, you should view that as a red flag for accounting fraud. Your alarm bells should be set off ringing if you discover that the accountant is regularly carrying out some of the work at his residence. Before you assign the employees that will be in charge of your bookkeeping section, it is imperative that you carry out a comparison of the accountants so that you are sure that they are credible.