Huge cases of fraud have
been seen in the accounting world. Although some of them happened decades ago,
they are still remembered because of their intensity. You would not want such a
big problem to rock your company and cause discrepancies in financial
allotment. To make you less prone to fraud, you have to understand your financial statement report.
One way to falsify the
financial statement is by not recording transactions accurately. There might be
discrepancies in the funds allocated to a certain project, bloating the amount
that goes out and diminishing the amount that gets in.
There are also instances
where people of power use their authority to record estimates that are far from
the true cost. This is easily done when there is no person to
monitor the actions of people with high positions regarding non-routine
transactions.
While management override
can sometimes be used to correct problems with the financial transaction report, this could also be used to change the
values and favor the person manipulating the data.
Without an internal auditing
body to double check transactions, it would be easier to falsify documents.
Furthermore, if one fraudster meets another, they could wreak more havoc that will
be harder to detect.
The capacity of a business
to continue operations is determined by its financial records. If there is too
much money loss, the company will be bankrupt. How will you know that your
business is doing good when fraudulent data shows that you are running out of
funds?
This is exactly why many
companies choose to have a separate accounting firm handling their finances.
This way, inconsistencies will be minimized and a detailed report of where the
funds go will be produced in a timely manner.
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