The paper 'The Main Aim of Accounting Fraud' is a great example of a business case study. Fraud entails an employee or an organization altering some account/financial details. It involves overstating of a company’ s assets or understating the liabilities. The main aim of accounting fraud is to display the business as financially stronger. or intent by an employee to fleece the company of the finances for personal gains. Most of the people involved with the fraud are not career criminals, they are the employees trusted by their employers and mainly with no criminal record (Wells, 2007).
These people end up committing fraud due to factors inherent in the business. Dr. Donald Cressey developed a model that tries to explain why trusted employees end up being fraudulent. He identified three factors that necessitate an ordinary employee or manager to get involved in fraud. These factors include pressure, opportunity, and rationalization. This paper will discuss the factors in relation to case studies provided. Green Grass is a small family-operated company that has specialized in horticultural service care and lawn care. In Green Grass company, there exist some fraud opportunities.
Some of the opportunities within Green Grass that predisposes the company to fraud include the fact that there is only one employee who runs the operations of the company. This may lead to a lot of work pressure. The employee who is trusted by the founding father and has vast experience in information systems and accounting is mandated with scheduling the routes of all the employees and he happens to be solely responsible for payments, receipts, and balancing the books. This means that there is no oversight over him which gives him the chance to engage in accounting fraud. The other opportunity for the fraud is in the eight employees who are responsible for driving trucks.
The track drivers are given the responsibility of collecting money from their respective customers. Again, this implies that the company lacks a good system for revenue collection. The individual collection of the revenues by drivers means that correct documentation may not be obtained and there is an opportunity for drivers reporting the wrong figures to the accounting officer. Symptoms of fraudIn many situations, it is very difficult to realize the acts of falsifying accounts.
However there some indicators that point to malpractices and which act as symptoms of fraud. According to Albrecht (2003) some of the symptoms of fraud include: Expenses that are inflated or unexpected revenues being reported. This normally acts as a cover-up to the accounting falsifications that may be taking place. Green Grass has been on steady growth over the years, abnormal revenues, which increased marginally, coupled with increases in the expenses over the last year raise a red flag which could be a pointer to major accounting fraud in the company. Fraudulent activities are also bound to happen if there is no proper observation and supervision of the undertakings of the accountant.
Such is the case in the Green Grass company where the accountant is in charge of the whole business. He oversees but he is not overseen. In companies where the accountant is in charge of the payments, revenue receipts, all the bank deposits this is a pointer to the possibility of fraud as there are no clear segregation of duties.
For instance, in Green Grass, the one employee trusted by the founder was in charge of all the financial obligations.
Albrecht, W. (2003). Fraud Examination. Thomson South Western Publishing.
Association of Certified Fraud Examiners. (2012) Report to the nations on occupational fraud and abuse: 2012 global fraud study. Available from: http://www.acfe.com/rttn.aspx.
Button, M., Lewis, C., Shepherd, D., Brooks, G. and Wakefield, A. (2012) Fraud and punishment: enhancing deterrence through more effective sanctions. Centre for Counter Fraud Studies, University of Portsmouth. Available from: http:// www.port.ac.uk/departments/academic/icjs/centreforcounterfraudstudies/documents/
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Federation of Small Businesses. (2009) Inhibiting enterprise: fraud and online crime against small businesses. Available from: http://www.fsb.org.uk/policy/assets/
Kroll, A. (2012) Global fraud report: annual edition 2012/13. Available from: http://www.krolladvisory.com/insights-reports/global-fraud-reports/.
Lewis, C. (2012). When mediation is a suitable, not soft, option. Fraud Intelligence. August/
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McConnell, C. 2007. Background checking to avert fraud. National Federation of Independent Businesses.
Wells, J. 2007. Occupational Fraud. Obsidian Publishing Company.