Fraud and Prevention

Fraud and Prevention

Fraud

In terms on accounting, fraud is generally reporting deceptive financial statements to mislead the behavior of the users of financial statements. False financial statement is the form of inflated earnings is the most commonly used means. A company manager from the grassroots to senior managers, are likely to be involved in the fraudulent activities of the financial statements; Certified Public Accountants and CPAs are the main participants of fraudulent financial statements to bear the corresponding legal responsibility. Many of the organizations that failed between 1999 and 2004 were subject to a misrepresentation of financial statements. The financial statements that were compiled and presented were from outside auditors who were not part of the organization. The financial information presented to the outside auditors was supplied by in-house accountants who were employees of the organization

Purpose, Causes, and Impact

The purpose of the accounting fraud and the illegal nature of the different can be divided into accounting civil fraud, fraud in accounting administrative and accounting of criminal fraud. Among them, for the interests of the ordinary civil or commercial interests for the purpose of providing false accounting information to others or intentionally "leaked" false accounting information, accounting civil fraud; deceived by the national regulatory authorities, the corporate authority or shareholders for the purpose of intentionally report false accounting information, deliberate attempt to confuse the accounting policies, accounting administrative fraud; to obtain illegal interests for others to seek illegal interests for the purpose of intentionally concealed the transaction fact, fictitious transactions, confusing accounting policies, the circumstances are serious enough to constitute a crime, is the accounting criminal fraud (DeJoy, 2010).

Prevention

Accounting fraud is as critical and illegal as other proscribed and criminal acts, such as between the behavior of and against the tax collection, smuggling, fraud, corruption linked with bribery, encroachment, and often there is a certain degree implicated with competing that led people in the accounting fraud which in itself is illegal and harmful to society and is against the legal regulation. The major force designed to prevent fraud is regular auditing with strict controls. Prevention of frauds greatly relies on internal control system within the business enterprises

Internal Control System

Organizations are greatly influenced by their organizational structure and management. They are the trend setters of the organization and management's philosophy plays an important role in determining and setting out procedures and systems. Technologically advanced companies use automated system of accounting whilst new arrivals initially rely on the manual system (Larson, 2006). Further, there are certain regulations posed by the regulators depending upon where the business has laid its operations and listing priorities.

The internal control comprises the plan of organization, the methods and procedures that have implemented an enterprise or business, structured as a whole to obtain three fundamental goals: a) obtaining secure and sound financial information b) safeguarding the assets and c) the efficiency of operations (Wells, 2005). A significant part of the internal control system directs to the internal audit department which is primarily responsible for detecting frauds and preventing it ...