Forensic Accounting Chapter 5

Procedures sales vs account receivables change in cash

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Unformatted text preview: ateral for a Loan, the Receivables are sold, the but the Loan is NOT repaid. but The Account Receivable balances The are inflated in order to qualify for large loans. for Chapter 5 Forensic Accounting 60 How Are Borrowing Against Accounts Receivable Caught ? 6. Evaluate Internal 1. Proper segregation of Evaluate 1. Proper duties. duties. Controls for cash 2. Review monthly bank Review receipts, A/R reconciliations. reconciliations. processes. processes. 3. Investigate difference Investigate 7. Use aging reports to Use between A/R identify and examine confirmations and the credits, write-offs on A/R ledger balance. A/R accounts over 120 days 4. Look for Unusual Entries Look in sales journal, general past due. past ledger, cash receipts 8. Compare dates of Compare journal, A/R subsidiary deposits with cash ledgers. ledgers. receipts journal receipts 5. Use confirmations to Use 9. Compare invoice to verify A/R balances. Compare verify customers’ c Section 5041 Note: Reference List Textbookustomers’ order Chapter 5 Forensic Accounting 61 Inventor Inventor y Fraud Fraud Note: Reference Textbook Section 5051 Chapter 5 Forensic Accounting 62 Inventory Fraud Stealing Inventory Stealing Short Shipment with Full Short Prices Chapter 5 Forensic Accounting 63 Stealing Inventory Stealing Personal Use. Personal To Sell – flea market. Return stolen inventory for Return cash cash Chapter 5 Forensic Accounting 64 How Is Stealing Inventory Caught? • Strong Internal Controls • Surprise physical inventory counts • Surveillance • Trend Analysis to review activity with Trend vendors vendors • Data-mining • Analytical Procedures Chapter 5 Forensic Accounting 65 Short Shipment with Full Prices Fraud by “Short Shipment” occurs when payment is made in full when however the vendor however intentionally delivered less than what was ordered. less The main element of this fraud is The Collusion. Chapter 5 Forensic Accounting 66 How Is Short Shipment Fraud Caught? Compare Inventory Received with Quantity Ordered with Surprise physical inventory counts Review journal entries for inventory Review adjustments adjustments Look for: Related Party Transactions and Collusion Opportunities Chapter 5 Forensic Accounting 67 Account Account s Payable Payable Fraud Fraud Note: Reference Textbook Section 5056 Chapter 5 Forensic Accounting 68 Accounts Payable Fraud Benford's Law Duplicate Payments Duplicate Rounded-Amount Invoices Vendor Who May Be An Employee Above-Average Payments Per Vendor Invoices Just Below Approval Amounts Rapid Increase Of Invoice Activity From A Vendor Vendor’s Invoices Have Sequential Invoice Numbers Numbers Chapter 5 Forensic Accounting 69 Benford’s Law – Major Digit Test Test First & Second Digit Analytical Tests First Digits Test – The first digit of a number is First the leftmost digit with the understanding that the first digit can never be a zero. For example, the first digit of 7,380 is “7.” For Second Digits Test - The second digit of a...
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This note was uploaded on 09/09/2013 for the course ACC 468 taught by Professor James during the Fall '12 term at SIU Carbondale.

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