Frauds:
It means false representation making wrong entry internally believing to be wrong. Following are the important kinds of frauds which are connected with the accounts.
1. Misappropriation of cash.
2. Misappropriation of goods.
3. Manipulation of accounts.
1. Miss appropriation of cash:
It means to take money dishonestly for one self. There are two methods by which misappropriation of money may be connected by the dishonest employee.
· Omitting to enter the receipt or under casting the receipt sides of the cash books.
· Entering the fictitious or excess payments.
·
Principle ways of misappropriation of cash:
1. Factitious purchase are recorded for the purpose of misappropriation the corresponding cash payments.
2. Factitious expenses are recorded for the purpose of misappropriation.
3. By putting the dummy names on the payment side of the cash book.
4. Theft of unusual receipt of cash like the sales of waste.
5. Sales cash may not be entered in the books and the cash is misappropriated.
6. By over casting the wages sheet, wages cash way is misappropriated.
7. Misappropriation of the proceeds of bills discounted the bills being showed as being in hand.
8. Cash received on account of goods sent for sale is misappropriated by showing that goods are returned back and not sold.
9. By tempering in the cash receipt and disbursement records cash is misappropriated.
10. Cash received from the customer is misappropriated by omitting the sale.
11. Approved and paid vouchers may also used for further payments.
Detection of misappropriation of cash:
Detection of fraud is the main responsibility of the auditor. He can detect this fraud if he conducts the complete vouching of the cash. Second helpful thing in detecting this fraud is the effective internal control system. If this system is effective it will be very easy for him to locate this fraud.
2. Misappropriation of goods:
It means to take the goods dishonestly. Theft of goods is very common among the employees, where the internal control system over the stock is very poor.
Detection of misappropriation of goods:
If the stock register is properly maintained. Purchase sales, consumption and stock taking record is available physically, stock can be checked and it can be compared with the record and misappropriation may be detected.
3. Manipulation of accounts:
False representation of accounts is another kind fraud. This is usually commited by the directors and management of the business with the object of either showing more profit or less profit than they actually are sometimes to maintain the confidence of the shareholders they show more profit than the real. Sometimes they show less profit in order to purchase the share at fewer rates this fraud may take place in the following way.
1. Over valuation or under valuation of expenses.
2. Over valuation or under valuation assets and liabilities.
3. Recording of fictitious purchases.
4. Recording of less purchase than the original.
5. Use of secret reserves without disclosing the shareholders during the period.
6. Depreciation not provided.
7. Deprivation provided but more or less than the real.
8. Recording fictitious expenses or omission of expenses.
9. Revenue expenditure charged to capital and vice verse.
10. Credit taking to accrued income not like to be received or commission of income.
Detection of manipulation of accounts:
Routine checking, verification, vouching and intelligent enquiries of an auditor may detect such kind of fraud.
EmoticonEmoticon