Report on Financial Statement Fraud Scheme Case Study: the Importance of Timing

920 words 4 pages
Report on Financial Statement Fraud Scheme Case Study: The Importance of Timing
University of Phoenix
December 19, 2011

To: The Management
From: Forensic Auditor
Date: 12/19/2011
Subject: Case Study on the Importance of Timing and Financial Statement Fraud Scheme As our company is in process of conducting investigation to detect any financial statement fraud or abuse, I have come across the case where expenses were recorded in the financial statement under the period it was disbursed to vendor and actual services occurred in next or other financial year period. It’s against the regulation of SEC and GAAP guidelines. In this particular case the repair were completed in current
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For example when there is an abnormal growth in number of day’s sales in receivable or decline in day’s purchases in accounts payable. These abnormalities and abuse can be avoided through reviewing acquisitions journal, general ledger and accounts payable master file to ensure that there are no large or unusual amounts. Also review vendors’ invoices, receiving reports, purchase orders and purchase requisitions to verify that they are valid and are for reasonable amounts. Trace inventory acquisitions to the inventory master file to verify that items recorded as inventory are all valid. Trace receiving reports and vendors’ invoices to the acquisitions journal to verify that all received goods have been properly recorded. Compare transactions recorded in the acquisitions journal to the vendors’ invoices, receiving reports, purchase orders, and purchase requisitions to verify that they have been recorded at their correct amounts, date, and quantities.

Other factors that aided in this investigation are from checking cash, and disbursement journal entries to be dated with the date of the check. The related monthly general ledger summary entries shall carry the date of the month summarized. Procedures that need to be implemented to ensure that fraudulent processing of vendor invoices does not exists would consist of: • Only original invoices being processed for payment

• Proper authorization obtained for price differences on


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