Please list each of the three conditions of fraud and identify one internal control procedure that...

Please list each of the three conditions of fraud and identify one internal control procedure that management can implement to reduce the risk of fraud occurrence. Be specific in the type of control that you describe. For instance, state the business cycle (e.g., treasury, inventory, receivables, etc.) and the way in which the control acts to mitigate fraud risk.

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Three conditions of fraud

Fraud is intentional

Fraud exist where Internal controls are weak

Fraud is hard to detect and prove as it is done with a plan

Fraud may also happen due to pressure on an employee(low salary)

Internal Control procedure to reduce the risk of fraud occurence is

Segregation of Duties which is assigning different people the responsibilities of authorising transactions,recording transactions and maintaining custody of assets and enabling cross check between themselves can reduce the risk of fraud .Segregation of duties will reduce the opportunities to allow any one person to be in a position to both perpetrate and conceal errors thereby reducing the risk of fraud

For instance in case of receivables there should be different set of people to collect the payment either in cash or check and another person to deposit it in bank and another person to record the same in books of accounts.Different set of registers to be maintained by different people.

Usually in case of receivables ,teeming and lading takes place.It is a fraud that results in delayed accounting lapping and allocating one customer's payment to another Customer's Account and thereby trying to hide shortfall or theft.

Strengthening the Internal Controls alone can help in reducing the risk of fraud '

Segregation of Duties and Constant monitoring of effectiveness of controls in place can reduce the risk of fraud

ekkarill92 answered 1 year ago

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