Question

Discuss three types of accounting anomalies and define why they are important to a fraud investigation and why the fraud examiner should be mindful of these anomalies?

Answer 1

Solution

Accounting anomalies are unusual deviations from the standard accounting practice.Any irregularity in the accounting statements from accounting practices are types of such anomalies. They are treated as fraudulent and unethical. There are various types of accounting anomalies they are

irregularities in the accounting system, such as

• Missing, altered, or photocopied documents
• Stale items on reconciliations
• Increased or excessive past due accounts
• Unexplained or confusing journal entries
• Inaccuracies in the ledger accounts
• Unexplained changes in financial statements

And following are the reasons for which these anomalies is very important to be known by the fraud investigator during investigation, as accounting anomalies are items within the accounting documents that look unusual. Again once investigated these anomalies may have logical reasonable explanations that may prove fraud is not occurring, however the anamalies point an investigator in the right direction to ask the questions that need to be answered. The anomalies could consist of some accounts payable invoices, for example, which are not thoroughly completed and have inadequate pricing information. It could also be an invoice paid twice to the same vendor.

The following are the reasons for which the fraud examiner should be mindful of these anamolies,

1. Fraud examiner when once complete his financial analysis, action must be taken to correct the situation and should mindful to educate the parties in the responsible area about the warning signs that were missed

2. Fraud examiners should pay close attention to warning signs of cash theft,since cash is the asset most often misappropriated

3.Employees who notice that fraud issue are ignored may mistakenly believe that it is okay to game the system or that they won’t get caught.A small fraud soon becomes a large fraud if left to grow so the fraud investigator should be very tactical in finding out the same and reporting to the management.