In general, the term fraud may be defined as the act of being dishonest when undertaking an activity with the objective of gaining some advantage or benefits of which can lead to loss of confidence by the public when discovered. In the field of accounting, the word fraud means an intentional manipulation of accounting information by individuals working within the business entity with the objective of deceiving the public and the company due to selfish ambitions.
Most of the fraudulent acts that have being reported by the Federal Bureau of Investigation include those of corporate organizations. Similarly, results from the FBI reports have shown that in these corporations, the individuals are applying tricks in presenting accounting information in order to achieve their selfish ambition, for instance, stealing funds. When this information is later availed to investors and the stakeholders, they reflect wrong information on the financial position of the business. In addition, many corporations have been the victims of information leakages because some of the employees might be sharing company’s confidential information without being authorized. This according to FBI has paralyzed the functioning of exchange market and thus rendering it inefficient (The Federal Bureau of Investigation, 2011).
The frauds committed at higher level of the organizational structure are more costly as compared to those done by the employees and managers at lower levels and therefore, it is also difficult to detect such type of frauds (Ratley, 2010). In addition, the management is in a good position to change accounting data without being identified because they cannot be suspected. They can cooperate or directs the employees to do what they want for their own benefits (Auditing Standards Board, 2012). In this section we shall be looking at two major types of frauds in accounting which are the financial reporting and the computer frauds in the business entity.
Preventing and Detecting Frauds
Secondly, the team should subject the data from various business transactions under a test to check whether there are any forms of frauds. These are done in all the transactions’ data since fraud can occur at any given time during the transactions and therefore, all the transactions should thus be analyzed (Millar, 2010 August 16).
Third, there should be a progressive auditing of all the business undertakings so as to ascertain the effectiveness of the business’s control systems. Scripts, according to Millar needs to be in place in order for the large data volumes to be tested for anomalies as a result of fraud (Millar, 2010 August 16).
The fourth point is that the monitoring program should be communicated to the whole organization. This will ensure that all the business transactions are monitored and each individual would develop a fear of being caught and thus it acts as a preventive measure (Millar, 2010 August 16).
Fifth, when issues arise in the business that can affect business, the audit team should report to the management for actions to be taken than waiting till it happens. They should prepare audit reports which are accompanied by the recommendations of possible fraud occurrence and its impact. The use of technology would help in quantifying its impact (Millar, 2010 August 16).
Sixth, the team should ensure that control is running well and any mistakes should be corrected, for example, the team should approve any transactions they initiate and they should also be the ones to receive the expected goods (Millar, 2010 August 16).
Finally, the team should always re-evaluate its fraud profile to check the common frauds and those which are not common in the organization (Millar, 2010 August 16).
Work Cited
Millar, P. (2010, August 16). Seven Steps to Jump Start Your Anti-Fraud Program. Corporate Compliance Insights. Retrieved from:
<http://www.corporatecomplianceinsights.com/7-steps-preventing-detecting-fraud>
