The Definition Of The Accounting Fraud And How To Identify It

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.

When the person charged with the responsibility of reconciling the bank statements of your organization is also a signatory to your cheques, this is a fertile ground where the accounting fraud will thrive. 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.

You should be wary of a member of staff in your organization that exhibits a personality that is intended to control others. Additionally, such a staff may appear to operate in a secretive manner. Usually the reason behind such a behavior is to act as a faade to hide some level of accounting fraud that could be taking place right under your nose.

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. The net effect of this is that the staff will be in a position to flout the existing controls as well colluding to commit the vice.

In the event that you notice that your accountant is often working after hours, you should be wary as accounting fraud could be in the offing. 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.