accounting fraud

What is the definition of fraud?

A deliberate act (or failure to act) with the intention of obtaining an unauthorized benefit by using deception or suppression of the truth.

How is corporate fraud defined?

Dishonest and illegal activities perpetrated by an individual or companies to provide advantageous financial outcomes.

What constitutes computer fraud?

Using a computer to take, alter, or hide electronic data, or gain unlawful access to a computer system.

What are accounts payable?

Records of goods and services that have been paid for, indicating what is owed.

What is the role of accounts receivable?

Keeps records of what is owed to the company, tracks invoices, and processes payment receipts.

What does payroll manage?

Ensures employees are paid properly.

Describe financial reporting in an accounting system.

All accounting functions feed into a General Ledger for reporting the company's status, relating equity to assets and liabilities.

What is the difference between a bookkeeper and an accountant?

A bookkeeper handles daily financial transactions, while an accountant provides reports, analysis, and advice.

What are the three categories of business fraud?

Misappropriation, corruption, and financial statement fraud.

What is misappropriation in the context of business fraud?

Stealing cash before it has been recorded, making false reimbursement claims, or taking non-cash assets.

What does corruption entail in business fraud?

Employees using their influence to benefit themselves through bribery, extortion, or conflicts of interest.

Define financial statement fraud.

Omitting or intentionally entering incorrect information in financial reports, such as fictitious revenue or hidden liabilities.

What are internal controls in accounting?

Checks and balances to ensure no single person controls all parts of a financial transaction.

Why is bank reconciliation important?

To ensure the bank statement matches the company's accounting records for accuracy.

What is a control regarding credit card use in a business?

Having a written policy on company credit card use, including limits and itemized receipts.

What should be done to protect petty cash?

Limit access to petty cash and require receipts for all reimbursements.

What is recommended for written policies in financial procedures?

Have written policies to handle and approve financial procedures consistently.

How can companies mitigate the risk of fraud by employees?

Be cautious of hiring relatives of employees and watch for signs of stress or unusual behavior.

What should be done after producing a financial statement for a period?

Close that period to prevent hiding transactions from previous periods.

Why is it important to have unique user IDs in computerized accounting systems?

To ensure individual auditing and event logging is possible.

What system can be created to address suspicious behavior in the workplace?

An employee reporting system for reporting suspicious activities.

What is the purpose of hiring external auditors periodically?

To look for evidence of fraud as needed and ensure financial integrity.