The auditor is alerted to the possibility of a lapping operation when duties are not properly separated. Surprise confirmation is the primary means that an auditor can use to uncover such activity. Also, to detect this type of lapping scheme, a detailed audit should include comparison of the checks listed on a sample of deposit slips (from say Customer B) to the detail of customer remittances recorded to customer accounts (Customer A). Doing so is an attempt to find credits given to customers for whom no payments were received on the day in question. It can be hard to detect. However, detailed scrutiny will allow the auditor to catch the fraudster. 6.12 All vendors should be required to be on an approved vendor list. Vendors are placed on this list with approval from multiple departments (e.g. purchasing, engineering, and quality control). In addition, payments should not be made without a complete voucher package including a purchase order and receiving report. Because fictitious vendors do not supply product or service, such a fraud would require collusion between purchasing and receiving. As a result, having an approved vendor list would help to prevent a fraud. 6.13 Whether the auditor examines the actual check or a scanned image obtained from the bank, knowledge of the codes for Federal Reserve districts, offices, states, and bank identification numbers could enable an auditor to spot a crude check forgery. If the amount of a check is altered after it has cleared the bank, the alteration would be noted by comparing the magnetic imprint of the amount paid by the bank to the actual amount that was written on the check face. If the numbers are different, further investigation should be completed. 6.14 On this bank statement, only two clues indicate that the statement may have been altered: The low balance is $2,374.93 (the correct balance) and no transactions occurred after this point. There is a space for a gap in the check sequence, but no ―**‖‗s as with the other gaps. An auditor can also scrutinize other parts of the bank statement for reasonableness. For example, the number and dollar amount of deposits and checks can be compared to the detail data on the bank statement, the mathematical accuracy of the statement can be checked, and the statement itself can be studied for alterations.
Chapter 06 - Employee Fraud and the Audit of Cash 6-6 6.15 The cutoff bank statement is a bank statement sent by the bank directly to the auditor, and it is usually for a 15- or 20-day period following the reconciliation date. The auditor basically uses the statement to determine whether outstanding checks were actually mailed by the client before the reconciliation date and that the outstanding deposits in transit were actually received in a timely manner by the bank.
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- Spring '11
- Balance Sheet, ........., employee fraud, Audit of Cash