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The Meaning Of Accounting Fraud And The Ways To Discover It

Accounting fraud refers to the methods that are employed for the purpose of manipulating the accounting records of an establishment deliberately. In many of the cases, this action is driven by the intention of depicting a company that has a better financial performance than the situation on the ground. 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 signs that accounting fraud is being perpetrated in your business is the sudden change of lifestyle by the people that are in charge of your finances. You will be able to see that the salaries that they are getting cannot be sufficient to support the level of the ostentatious life that they are having.

If you notice that the financial numbers have a similar pattern you could be dealing with case of accounting fraud in your company. When specialists are performing the forensic accounting, this is a misnomer that they encounter all the time.

If you have allocated your company’s cheques signer the task of carrying out the reconciliation of the bank records that belong to your organization, the likelihood that accounting fraud is very high. It is highly advisable to separate activities such as these as they conducive to the commission 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. As well such a person is likely to act in ways that you consider as secretive. 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. The resultant effect of this scenario is that the employees will not only engage in collusion but are better placed to circumvent the regulations that have been put in place.

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. You should be suspicious as well if the staff is carrying some of the work home. When you are hiring the staff for your finance department, it is advisable to compare accountants to ensure that they have integrity.