... forged her signature, and cashed the check. Violation: The payroll clerk only have an authority to prepare the paycheck, not to signature or cashed the checks. The signature of payroll is the duty of HR manager, while cashed the paychecks is the duties of the cashier, so, the payroll clerk has violated his/her job description and his/her authorities. Solution: In this case, we must make know job description and authorities to the clerk. Because the duty of clerk on this case is only record the activities happen. If all the job done by the clerk, the clerk can make a manipulation or some fraud for example, that the clerk issue a check but the check is not for the employee but for the clerk. So we must have someone to control the clerk and cut it out when some mistake happen. And to solve this case we can also order someone to be the HR manager to make this case more secure from fraud. And for cashed the check we can give that job to cashier. After separate this duty and authorities we can minimize the risk. b. While opening the mail, cashier set aside, and subsequently cashed, two checks payable to the company on account. Violation: In this case, I think the problem, is why the cashier opened the mail? I think this is clerk job. The cashier job is only spend the money. So we must make a new job description for the cashier and the clerk. Solution: So we can make solve this case by, first we must separate the...
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...Swan: Analysis of the Statistical Evidence of Electoral Fraud in Venezuela Ricardo Hausmann Harvard University Roberto Rigobón Massachusetts Institute of Technology September 3, 2004 *This study was requested by Súmate who also provided the databases we used. We appreciate the great information gathering effort carried out by this organization. We are equally indebted to a hard working collaborator who, because of institutional reasons, must remain anonymous. We thank Andrés Velasco as well for his useful comments. The opinions expressed in this report and the errors we may have incurred are our responsibility and do not compromise either Súmate, or the universities to which we belong. 1 Abstract This study analyzes diverse hypotheses of electronic fraud in the Recall Referendum celebrated in Venezuela on August 15, 2004. We define fraud as the difference between the elector’s intent, and the official vote tally. Our null hypothesis is that there was no fraud, and we attempt to search for evidence that will allow us to reject this hypothesis. We reject the hypothesis that fraud was committed by applying numerical maximums to machines in some precincts. Equally, we discard any hypothesis that implies altering some machines and not others, at each electoral precinct, because the variation patterns between machines at each precinct are normal. However, the statistical evidence is compatible with the occurrence of fraud that has affected every machine in a single precinct,...
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...the predecessor auditor indicated the possibility that Smith’s financial statements may be misstated due to the possible occurrence of errors, fraud, and illegal acts. a. Identify and describe Reed’s responsibilities to detect Smith’s errors and fraud. Do not identify specific audit procedures. b. Identify and describe Reed’s responsibility to report Smith’s errors and fraud. a. Reed’s responsibility to detect fraud is the same as his responsibility to detect any unintentional errors to the extent that they are material and have a direct effect on Smith’s financial statements. These responsibilities entail performing a fraud risk assessment and performing the audit with due professional care & skepticism (Boynton & Johnson, 2006, pp. 57-58). As an auditor, the responsibility for specifically detecting material misstatement due to fraud was expanded by SAS 99, but there still remains an expectation gap between what an auditor currently does do and should do (Zikmund, 2007, p. 31). b. The next question that arises is what responsibilities exist in regards to an error or fraud that was detected. Reed’s first and most basic responsibility is to communicate the detection to management. If the issue related to a fraud, then it should be communicated to at least one level higher than the fraud that occurred. If the fraud was perpetrated by senior management and caused a material misstatement, then Reed would need to report it directly to the audit committee...
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...Once found evidence of fraudulent accounting, external auditors must communicate the findings within Apollo with the committee or other governing body. External auditors also report the effect that the fraud may result with Apollo. We would plan and conduct our audit with professional skepticism. We are required to recognize the condition or events that suggest if fraud may exist. Based on the audit risk assessment we conduct, we develop audit procedures to obtain reasonable assurance that substantial frauds have been found. It is expected that the auditor to implement procedures that will lead to the discovery of errors or fraud without significant impact on the financial statements can not be held responsible for undetected such irregularities. The auditor should communicate with the management of his client. He should ask the management information concerning any significant fraud or error has been detected in order to detect key problems that could lead to certain activities, the implementation of audit procedures more than usual However the auditor faces the risk inevitable that some significant errors to be detected, even if the audit is planned and done properly. Type accounting fraud The most common type of fraud, the audit found that revenue recognition errors. Revenue recognition is the earnings report, the company's revenue. Some companies may incorrectly report the income is not fully available, the circumstances under which happens to pay a year's time, all...
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...6 b. The Need for an Audit 7 c. Risk of fraud 8 d. The Auditor-Investor ''Expectation Gap'' 9 e. Auditing Profession and Challenges 9 f. Public opinion 10 g. Family or Personal Relationship 10 h. Integrity 11 i. Inherent limitations of an audit. 11 j. Responsibility of Auditors to Third Parties – Case Law 12 k. International, Assurance Auditing, Standards Board (IAASB) 14 CORPORATE FRAUD CASES 16 CASE STUDY: 21 CONCLUSIONS………………………………………………………………………………24 REFERENCES……………………………………………………………………………..….25 SUMMARY OF TERMS ISA: International standards of Audit KPC: Kenya Pipeline Company IAASB: International Assurance Audit Board IFAC: International Federation of Accounting USD: United States Dollar KCB: Kenya Commercial Bank BCCI: Bank of Credit International SEC: Securities and Exchange Commission ABSTRACT The way in which auditors perform their duties and the auditing profession in general raises questions and puts the auditors on the spotlight from clients who rely on their reports. Questions on whether the public trust the way auditors perform their secondary duty of detecting errors and frauds, the reliability, completeness and accuracy of their auditing reports have been raised. The research focuses on; Management and auditors’ responsibility for its prevention and detection of fraud, the auditor’s responsibility for reporting fraud to management. The primary responsibility for prevention and detection of errors and irregularities rests with management...
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... Once found evidence of fraudulent accounting, external auditors must communicate the findings within Apollo with the committee or other governing body. External auditors also report the effect that the fraud may result with Apollo. We would plan and conduct our audit with professional skepticism. We are required to recognize the condition or events that suggest if fraud may exist. Based on the audit risk assessment we conduct, we develop audit procedures to obtain reasonable assurance that substantial frauds have been found. It is expected that the auditor to implement procedures that will lead to the discovery of errors or fraud without significant impact on the financial statements can not be held responsible for undetected such irregularities. The auditor should communicate with the management of his client. He should ask the management information concerning any significant fraud or error has been detected in order to detect key problems that could lead to certain activities, the implementation of audit procedures more than usual However the auditor faces the risk inevitable that some significant errors to be detected, even if the audit is planned and done properly. Type accounting fraud The most common type of fraud, the audit found that revenue recognition errors. Revenue recognition is the earnings report, the company's revenue. Some companies may incorrectly report the income is not fully available, the circumstances under which happens to pay a year's time, all...
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...2. The Consent (continuare) As you know the juridical act, is the expression of smbdy's will meant to produce legal effects. From a juridical point of view, the juridical will of the parties is a complex issue. It is composed by two elements: - the consent; - the consideration. The consent means the externalized decision or intent to conclude a contract. In order to be valid, the consent must fulfill several conditions as follows; 1. To be expressed by person who is mentally capable to conclude the act. It means that the parties must have judgment or discernment, must be able to understand the nature of the act and its consequences. A pers that has a full concrete capacity is presumed by law to have judgment or discernment. This legal presumption may be overruled by proving the temporary lack of judgment of the person in question, as for example for temporarily mental illness, or influence of drugs. You can find this in the civil code Art. 1205 paragraph 1 2. To be expressed by a pers. who has the intention to produce legal effects. This condition is not fulfilled when for example the pers. Is only kidding, he has no real intention to conclude a contract – informal bet. 3. To be externalized. It means that the consent must result from the words or even the actions of the parties. In this respect several problems arise in case of silence. Generally in our law the consent cannot be implied and therefore in case of silence it is considered that there is no consent...
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... Secondary objective – it is also called the incidental objective as it is incidental to the satisfaction of the main objective. The incidental objectives of auditing are: i. Detection and prevention of Frauds, and ii. Detection and prevention of Errors. Detection of material frauds and errors as an incidental objective of independent financial auditing flows from the main objective of determining whether or not the financial statements give a true and fair view. As the Statement on auditing Practices issued by the Institute of Chartered Accountants of India states, an auditor should bear in mind the possibility of the existence of frauds or errors in the accounts under audit since they may cause the financial position to be misstated. Fraud refers to intentional misrepresentation of financial information with the intention to deceive. Frauds can take place in the form of manipulation of accounts, misappropriation of cash and misappropriation of goods. It is of great importance for the auditor to detect any frauds, and prevent their recurrence. Errors refer to unintentional mistake in the financial information arising on account of ignorance of accounting principles i.e. principle errors, or error arising out of negligence of accounting staff i.e. clerical errors. When we speak of the objective, we rationalize the thinking process, to...
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...------------------------------------------------- Fraud and forensic accounting in small business’ Tasha S. Barnes ------------------------------------------------- Fraud and forensic accounting in small business’ Tasha S. Barnes Accounting fraud is serious issues for all businesses, but they are especially challenging for small companies that are “cash strapped”. Fraud undermine decision making, lead to financial losses and, in some cases, even force companies to lay off staff or shut their doors. Fraud is a common problem for small businesses. According to the Association of Certified Fraud Examiners (ACFE), 30 percent of all fraud occurs in small companies. That is a disturbing fact considering that the estimated fraud loses for business of all sizes was nearly $2.9 trillion in 2009. Fraud occurs so frequently in small business for a couple of reasons. A common reason is that small companies typically have small or even single-person accounting staffs and limited internal controls; lack of separation of duty. It is typical to have the accountant also be the office manager and receiving clerk. Problems can arise if for no other reason than on one double checks the work. Besides being more susceptible to errors and fraud, small businesses also are less likely to discover them because financial audits are almost never performed. It seems, as though a new scam comes to light every day, with electronic-media inspired frauds such as phishing and spoofing, joining old, low-tech fraud themes. The...
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...percent of revenues to internal fraud. This may seem like a small percentage but it adds up. That five percent can be the difference between staying afloat or filing bankruptcy. When a company spends time and money to prevent fraud it is far less than running the risk of internal fraud. The most effective way to prevent fraud is to establish a proactive fraud prevention program. It is best if a company seeks the advice from a qualified fraud expert. A successful fraud prevention program requires three elements: education, investigation, and proactive preventative techniques. Most internal frauds are brought to attention from employees, customers, or vendor tips. Employees are the most likely source to provide tips of misconducts. So implementing a company-wide education program is a crucial part of a fraud prevention program (Coenen, 2011). Fraud education should focus on fraud awareness and should be presented to all employees. Investigating fraud is important to a comprehensive fraud prevention program. Although investigations are time consuming and costly the benefits are worth it. Investigations can have deterrent effects on potential thieves. Investigations send a company-wide message that management is aware and looking for fraud. Proactive fraud prevention techniques are the biggest asset in the company’s fraud prevention plan. Proactive fraud prevention techniques should include policies and procedures that aim to detect and prevent fraud. One example is establishing...
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...controls: 1. Control-Controls are made when the clerk entered the orders. Error or fraud controlled-At the time of billing and delivery there is errors in the sales transaction. 2. Control- When the computers are being prepared, they are given numbers to sales invoices. Error or fraud controlled-Controls the recording of sales to confirm completeness. 3. Control-The customers are mailed monthly statements. Error or fraud controlled-Controls the recording of inaccurate sales to customer accounts. 11B-1) Cash receipts controls: 1. Control-The receptionist uses cash receipts, which are prelisted. Error or fraud controlled- Based on the recording of cash receipts and the controls of cash abstraction. 2. Control- The accounts receivable computer program is handled by the accounting manager. Error of fraud controlled- Controls the misuse of cash receipts and errors and incomplete posting to records of receivables. 3. Control- The computer summaries of collection of cash and cash sales are reconciled to prelisting of cash receipts and deposits by the accounting manager. Error or fraud controlled-Controls the cash abstraction and the inappropriate recording of cash sales and receipts. 11A-2) There are multiple weakness found throughout. One in particular is the sales invoices, which are created and mailed before to supply of goods. An error that could possibly occur is the qualities of goods, which could be ordered wrong or...
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...Auditors’ Ability to Assess Fraud Risk on Their Ability to Detect the Likelihood of Fraud Nahariah Jaffar* Faculty of Management, Multimedia University Arfah Salleh Graduate School of Management, Universiti Putra Malaysia Takiah Mohd Iskandar Faculty of Economics and Business Management, Universiti Kebangsaan Malaysia Hasnah Haron School of Management, Universiti Sains Malaysia ABSTRACT The Malaysian Approved Standards on Auditing, AI 240 on “Fraud and Error” (MIA, 1997) requires the auditor to assess the risk of fraud and error during the audit of financial statements. Based on the risk assessment, the auditor should design audit procedures to obtain reasonable assurance that misstatements arising from fraud and error that are material to the financial statements taken as a whole are detected. Inability of the external auditor to detect material misstatements, particularly intentional misstatements, may expose the external auditor to litigation. The present study aims to examine the effect of the external auditor’s ability to assess fraud risk on his/her ability to detect the likelihood of fraud. An experimental approach is adopted by sending case materials to audit partners and audit managers attached to auditing firms operating in Malaysia. The result shows that in a high fraud risk scenario, the external auditor’s ability to assess fraud risk has a positive effect on his/her ability to detect the likelihood of fraud, whereas in a low fraud risk scenario not. The...
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...We are looking at employee fraud and the identification of the fraud and the classifications. In this case, we are looking at an employee who first paid for a family meal with a company credit card and then submitted the receipt for reimbursement of his business expenses. In my opinion this behavior is fraud. First, the company has already paid for these meals with the co-worker’s family by the employee using his corporate credit card to pay for these meals. The amount of the receipt has no bearing on whether the actions of the co-worker is considered fraud. When you think about all the stories of employee’s embezzling funds from their employer, they will start with small amounts that are barely noticeable and without proper internal controls, these amounts can go unnoticed for years before they are caught. In determining that the behavior is fraudulent, it is our responsibility to report the fraud to upper management, first, because this type of behavior could have been going on for months or years because someone was afraid to report it or they lacked the ethical responsibility to their employer to report it. In the scenario provided, the employee was confronted by the other party who witnessed the expense fraud. At which point the employee claimed it was an error and he did not realize what he had done. The question here is: Was this an error or Fraud? Fraud is defined as “a generic term, and embraces all the multifarious means which human ingenuity can devise...
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...DeVry University College of Business and Management Pomona, California Course Project ethics in accounting: Accounting error or fraud? By Rasha Amin R_7419@yahoo.com Submitted in Partial Fulfillment of the Course Requirements for Current Issues in Accounting Acct 525 Professor: Kenneth Shinedling 08/27/2014 Ethics in Accounting: Accounting error or fraud? Introduction: Accounting profession all over the globe has developed its own principal based professional ethics where integrity, objectivity, diligence, loyalty and professional behavior are the five virtues professional accountants should have all the way. Integrity: it means simply, that you have to be honest and straightforward in all professional and business relationships. Objectivity: it is that professional accountant shouldn’t be influenced by others in a way that affects his professional or business judgment or opinion. I.e.:- to avoid any conflict of interest and not to be biased to any party. Diligence (Professional competence and due care): To maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional services based on current developments in practice, legislation, and techniques and act diligently...
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...1) What important internal controls were ignored when LJM1 was created? LJM1 ignored some of Enron’s entries in the books that were missing. Outsiders owned less than 3% of the Special Purpose Entities equities. There was an error made by Arthur Andersen to let LJM’s financial statement to remain unconsolidated. If the financial statements had been consolidated, some of the errors could have been found. They may have even had some time to correct these errors before that had gotten so far out of control. There was not governing controls in place and fraudulent activities were unlimited. Andrew Fastow created LJM1 to handle investments with Rhythms NetConnections, high-speed Internet service provider. The stock that they bought at $10 million was worth $300 million after a year. Enron tried to sell the stocks to an investor, in case the stock price dropped. They could not find an investor to purchase the stock at the put option because of the risks that was involved. 2) How might Enron’s harsh Performance Review Committee (PRC) have aided company executives in committing the fraud? Enron’s harsh Performance Review Committee (PRC) has aided company executives in committing the fraud because the high turnover may have caused them to seek revenge. All of the Enron employees were rated on a scale of 1-5. The employees that are at bottom of the scale were terminated and replaced. The employee may have known that they did not do so well and would be rated as the lowest score on...
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