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Record on Economical Statement Scam Scheme Case Study: The Importance of Timing ACC/556 Professor College or university of Phoenix, az December 19, 2011 Memo To: The Management Via: Forensic Auditor Date: 12/19/2011 Subject: Example on the Importance of Timing and Financial Affirmation Fraud System As we are in means of conducting research to detect any financial statement scam or abuse, I have run into the case wherever expenses had been recorded in the financial assertion under the period it was disbanded to supplier and genuine services occurred in next or perhaps other monetary year period.

It’s up against the regulation of SECURITIES AND EXCHANGE COMMISSION’S and GAAP guidelines. Through this particular circumstance the restoration were completed in current 12 months and seller was prepaid for solutions in full this past year financial period, which a violation simply by recording expenses in the wrong period.

Nobody took the funds and commit fraud but it shows inaccurate bills and income in financial declaration for equally current and past years. It was done to maintain the fix budget for recently as there was room to shell out more last year, so the flower supervisor and buy manager decided to pay beforehand last year and actual companies were occurred this year.

As per scope of examination a business can lose a substantial amount of income through work-related fraud and abuse. There is certainly several prevention methods may be implemented with a company to stop frauds and abuse by simply employees. This misleading financial statement scam may effects our industry’s investment potential, credit worthiness, business operation, and employee morale (Wells, 2005). The SEC Acts of 1933 and 1934 were passed simply by Congress of United States to supply sources of potential liability pertaining to accountants to make sure protection for investors as well as for facilitation of orderly capital markets (Lowers, Ramsey, Sinason , Strawser, 2007).

These types of acts enforce accountability upon accountants to practice integrity once working for clients and financial institutions by credit reporting misstatement disclosures in financial claims. As a forensic auditor We collect proof from company’s employees, buyers, vendors, and anonymous sources. The testing tools and techniques utilized in this exploration consists organized random collection of data via selected options. The forensic accountant use computer forensics, data stats and interviews to allow them to build much of the necessary evidence for an investigation.

This abuse was detected once we see the account of hefty amount paid by end of the a year ago without any inspection report or repair achievement document in file. The further investigation demonstrated it was completed later this year. No employee took virtually any funds to commit financial fraud or perhaps larceny however the financial affirmation were deceptive to the users of those statements. A company may experience these kinds of type of maltreatment or corruption schemes designed at any given time, multiple area or perhaps all over the company.

Corruption can be carried out by fraudster employees who intentionally and wrongfully employ their impact to gain personal financial gain via company business transaction. It might be limited to a specific department or perhaps it may exist in all structural levels. It is essential for a company to review economical status routinely to ensure proper accounting and reporting methods are adopted in whole of firm business ventures. It is extremely crucial to review ahead of an end of year transactions with heavy amounts to ensure validity of amount and services took place in that economical year.

There are many other warning an detective or auditor can find to detect this sort of recording of expenses in wrong period. For example when there is a great abnormal progress in quantity of day’s sales in receivable or decline in day’s purchases in accounts payable. These malocclusions and mistreatment can be averted through critiquing acquisitions log, general ledger and accounts payable expert file to make sure that there are zero large or perhaps unusual quantities. Also assessment vendors’ accounts, receiving reports, purchase requests and purchase requisitions to verify that they are valid and are for reasonable portions.

Trace products on hand acquisitions for the inventory master file to verify that items noted as inventory are all valid. Trace acquiring reports and vendors’ accounts to the purchases journal to verify that most received merchandise have been effectively recorded. Assess transactions documented in the purchases journal to the vendors’ bills, receiving reports, purchase purchases, and purchase requisitions to validate that they have been recorded at their accurate amounts, day, and volumes.

Other factors that aided through this investigation are from examining cash, and disbursement diary entries being dated while using date in the check. The related month to month general journal summary articles shall take the date in the month summarized. Procedures that must be implemented to ensure fraudulent control of seller invoices would not exists will consist of: ¢ Only unique invoices getting processed intended for payment ¢ Proper authorization obtained intended for price distinctions on invoices Proper documentation obtained pertaining to quantity differences on invoices ¢ Accounts received from authorized suppliers ¢ Verify stock needs to have pre-printed continuous numbers and logged in a register ¢ Separation of duty intended for printing and mailing of vendor checks ¢ Separating of work for computer system vendor masters listing and updates ¢ Ensure items is effectively delivered to a firm facility. ¢ Reviewing standard ledger records for strange amount and date of the year.

The substantive procedures to test success of interior controls pertaining to recording expenditure is to analyze accounting documents, reports, documents, control related activities, and client methods. The implementation of previously discussed procedures is going to decrease the likelihood of fraud and abuse in an organization. Recommendations: Wells, L. T. (2005). Principles of Fraud Evaluation. Hoboken, NJ: McGraw-Hill. Mulford, C. T., , Comiskey, E. Elizabeth. (2002). The Financial Figures Game. Hoboken, NJ: John Wiley , Sons, Incorporation.

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