Discussion Questions

Discussion Questions
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Discussion Questions
What irregularities should a fraud examiner look for in a firm's accounts receivable area?
The first fraud that the examiner can look at is the account receivable number. This is the number that is in the balance sheet that shows the actual number of accounts that were collected. This number is estimated because the management just estimates the number of clients that owe the organization and not the actual number of accounts that were actually collected. Another fraud is evident when the valuation of accounts exceeds the estimate of the accounts collected. This is because there is no cash, which is collected in the account. This may cause the management to fill in a false in excess sales by creating ghost customers and filling in false sales. For a large organization, the companies mainly rely on statistical sampling, which do not give the exact collectable accounts but gives an estimate (Elmaleh, 2006).
What irregularities should a fraud examiner look for in a firm's fixed assets?
Generally accepted account principles usually allow various methods of important life of assets and depreciation that is usually estimated thus causing the management to appear much more profitable than it is by understating the expenses involved in depreciation. Another thing that the examiner may look at is the overstating of the useful life of assets by the understatement of the expenses that are associated by depreciation. This may also be as a result of the management staff overstating the assets by keeping the non-functional assets in the balance sheet. This will also cause overstatement of the net income since there is no record of loss in the disposal of these obsolete assets (Elmaleh, 2006).
What is pay-and-return scheme? List three examples of how this type of fraud can be committed.
A pay and return scheme is whereby an employee will continuously embezzle money from an organization by creating ingenious ways to defraud. Some of the examples of a pay and return scheme are: (1) a dishonest employee makes an overstatement to a vendor and, as a result, the employee will go home with a subsequent refund. (2) Another situation is whereby the payments that are owed to a vendor are fraudulently mishandled by the employee and are paid to the wrong client or buys excess goods or services. (3) An employee may also over bill the invoice of the vender and create an invoice that was paid already (...