Dage Michael Martinez
Fraud Auditing
May 1, 2016
Fraud Audit Program: Hollate
Assess:
Fraud: Type/Scheme
Control Opportunity
Occurs/Fraud Scenario
Concealment
Red Flags
Conversion
Journal Entry Scheme
The scheme likely occurred due to management override of controls. Strengthen controls to discourage management override may prevent this from happening again.
CFO is creating journal entries to increase company inventories and decrease costs of goods sold.
Internal audit team was required to meet directly with CFO and the CFO required the internal audit team to work on acquisition related projects to keep them unaware about what had been going on.
Internal audit team reports to CFO. Internal audit team focuses mainly on operational controls …show more content…
It would also be important to look into transaction descriptions. It is often the case that a fraudulent transaction will be paired with very little or no description at all. Through pattern and frequency analysis we could single out transactions that prove whether or not this type of entry was in fact fraudulent or not. Understanding industry regularities could also prove to help us in successfully identifying the fraudulent entries in …show more content…
The question boils down to whether the transactions suspected of being fraudulent are valid or not. In order to have the best outcome, we want to search further than the suspected transaction and really look into the red flags of the situation and try to figure out the concealment strategy used. The procedure will look to authenticate, identify, and link to a fraud and/or concealment strategy. Specific audit procedures that may prove useful are analyzing the sales of the company and re-calculating the costs of goods sold in order to see if the calculation matches what is in the account. If the calculations do not line up with what is in the account, we may see that the entries were in fact fraudulent. It would also be helpful to get an independent inventory count to see if the physical count matches what is in the inventory account effected by the journal entries. This may be the best procedure we have to verify if the entries were in fact fraudulent. The costs of goods sold account isn’t of a physical nature like inventory. Inventory can be counted and therefore matched up against the balance sheet to be
Fraud Auditing
May 1, 2016
Fraud Audit Program: Hollate
Assess:
Fraud: Type/Scheme
Control Opportunity
Occurs/Fraud Scenario
Concealment
Red Flags
Conversion
Journal Entry Scheme
The scheme likely occurred due to management override of controls. Strengthen controls to discourage management override may prevent this from happening again.
CFO is creating journal entries to increase company inventories and decrease costs of goods sold.
Internal audit team was required to meet directly with CFO and the CFO required the internal audit team to work on acquisition related projects to keep them unaware about what had been going on.
Internal audit team reports to CFO. Internal audit team focuses mainly on operational controls …show more content…
It would also be important to look into transaction descriptions. It is often the case that a fraudulent transaction will be paired with very little or no description at all. Through pattern and frequency analysis we could single out transactions that prove whether or not this type of entry was in fact fraudulent or not. Understanding industry regularities could also prove to help us in successfully identifying the fraudulent entries in …show more content…
The question boils down to whether the transactions suspected of being fraudulent are valid or not. In order to have the best outcome, we want to search further than the suspected transaction and really look into the red flags of the situation and try to figure out the concealment strategy used. The procedure will look to authenticate, identify, and link to a fraud and/or concealment strategy. Specific audit procedures that may prove useful are analyzing the sales of the company and re-calculating the costs of goods sold in order to see if the calculation matches what is in the account. If the calculations do not line up with what is in the account, we may see that the entries were in fact fraudulent. It would also be helpful to get an independent inventory count to see if the physical count matches what is in the inventory account effected by the journal entries. This may be the best procedure we have to verify if the entries were in fact fraudulent. The costs of goods sold account isn’t of a physical nature like inventory. Inventory can be counted and therefore matched up against the balance sheet to be