The common ingredient shared by the four classifications of corruption is using the scheme when
it comes to making decisions, mainly business related.
Low bid rewards are followed by change orders or amendments that significan
For the dollar change in cash, we subtract the base year amount of $23,500 from
the current year amount of $12,000 to determine that the change in cash was
We know the percentage change will be negative. To determine the percen
Differences in accounting methods between companies sometimes make it
difficult to compare their financial data. For example:
If one company values its inventory using the LIFO method and another uses the
average cost method, then direct compari
o The adjustments for accounts that affect revenue are the same in the
direct and indirect methods. In either case, increases in the accounts are
deducted and decreases in the accounts are added.
o The adjustments for accounts tha
The fourth step is to code sources of cash as positive numbers and uses of cash
as negative numbers as shown.
o The fifth step is to make any necessary adjustments including
adjustments for gains and losses. The net effect of these adjust
o There are two acceptable formats for presenting the cash flows from
operating activities. The direct method reconstructs the income statement
on a cash basis from top to bottom. For example: Cash collected from
customers is used instead
In addition to the three primary classifications on the statement of cash flows,
there are two other requirements: (1) the reconciliation of the net increase or
decrease in cash with the change in the balance of the cash account, and (2)
Decreases in liability accounts imply uses of cash. For example, if a company
makes a payment on a note payable, the companys cash balance decreases
This simplified approach does not follow the format required for external reporting
In a statement of cash flows, cash is broadly defined to include both cash and
Cash equivalents consist of short-term (usually less than ninety days to maturity)
highly liquid investments, such as Treasury Bills, commercial pap
An investment can be viewed in two ways its future value or its present value.
In the example just completed, the present value was known and the future value
was the unknown that we computed. Lets look at the opposite situation, where
The perpetrator is not altering a document.
He is preparing the check and signing it to himself for personal
Step 1: payable to:
His own business
Fictitious person or company
A vendor(personal purchases) I.E. Credit card co
When I say he I mean he or she
Jospeh T. Wells in the Principles of Fraud Examination defines an authorized maker scheme as
a type of check tampering fraud in which an employee with signatory authority on a company
account writes fra
Auditing vs. Fraud Examination
Audits are conducted on a
regular, recurring basis.
The audit is a general
examination of financial data.
An audit is generally
conducted to express a
1. Register Disbursement Schemes- two basic fraudulent disbursement schemes take place
at the cash register: false refunds and false voids.
a. False Refunds- a false refund scheme in which an employee processes a fake
refund transaction as if a
1. What accounting anomalies are present in the situation above? The most prevalent
accounting anomaly was the lack of supporting documentation of transactions. If you do
not have the supporting documentation, how does the auditor know when the revenue
To compute the trend percentage, we divide the current period amount by the
base period amount and multiply by 100%. All values are expressed as a
percentage increase or decrease, relative to the base year, which is usually the
oldest period sho