Excessive Compensation.
Balance and Fairness of Peer Compensation.
Related Party Transactions or special function
Stacked Boards or
Excessive Compensation.
Balance and Fairness of Peer Compensation.
Related Party Transactions or special function
Stacked Boards or
Manuevered numbers, fact-fudging.
But greed, desperation, emotional factors, bad judgement, and immorality, shift boundaries and drive some company executives to corporate fraud.
To detect, you need to learn warning signs of Earnings Manipulation. According to Investopedia- the Top 8 Ways Companies “Cook the Books”
Accelerating Revenues
Delaying Expenses– expensing in the period was spent- not drawn out over time, is a more appropriate treatment. (Shifting the actual cost off the Income Statement, to the Balance Sheet to be expensed over months and years
Patterns emerge and Red Flags of warning – for intended diversion of control – , include
Lack of Transparency
Lack of Standard of Care, Attention to Detail, Attitude of Due Diligence
Lack of Procedures
Lack of Accuracy
Lack of Completeness
Single Person POS – Point of Sale
Non Transparent Revenue Procudures
Cooking the Books- Delaying Expenses
Control in the Accounts Receivable department is essential when managing the company’s cash flow, and many factors can influence and effect the accuracy to Received and Recorded money.
Contract Terms: the terms you have with various contractors and clients you work for, affect how and when they are required to pay you. If your company allows lines of credit – the terms of When and How effect Accounts Receivable. Extended or Ambiguous Terms are a loss of control of how you are paid.
Exact Procedures: Attention and Regard to Transparent, clear, stated procedures regarding Receiving and Recording Revenue.
Owner Operated or Employee Accuracy: Accuracy affects the control of company finances.
“Quality of Receivables”
Revenue skimming occurs at the Point of Sale : pocketing the cash and ringing- or never indicating – “no sale”, pocketing rents, insurance premiums, cash to avoid payment of income taxes.
Keeping in mind the “Three R’s” – revenues, receivables and refunds, data from the ACFE reports Revenue is by far the most popular target for skimming. Revenue skimming is an off-book fraud. Accounts Receivable and Refund Skimming are on-book frauds.
Skimming revenue, before it hits the books and records, can be the Achilles Heel for the Auditor and evidence must be proved circumstantially. In criminal cases “beyond a reasonable doubt”; in civil cases by the “preponderance of evidence”.
Thinking about- and planning for – the Unthinkable.
Internal Controls such as “Separation of Duties” are common defenses against embezzlement.
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