Frauds & Errors By Ankur Mittal

Frauds & Errors

Chapter III

Objectives of Audit

Secondary

Primary

Promoting efficiency

Promoting accuracy

Error detection

Embezzlement of cash

Fraud detection

Prevention of error

Misappropriation of goods

Prevention of fraud

Manipulation of accounts

Errors Mistakes, Lapses, wrong way of doing things  It is unintentional  Result of carelessness  Errors are either mathematical or clerical  Occur at any stage in transaction processing  Errors can be accounting or procedural 

Accounting errors  Error

of Omission  Error of Commission  Compensating error  Error of transposition  Error of duplication  Error of Principle

Fraud 

An act of deceiving illegally in order to make money or obtain goods*

 The

practice of deception or artifice with the intention of cheating or injuring another**

 *Oxford

Dictionary

 **Kohler’s

Dictionary of Accountants

Fraud or Management Incompetence??? Persons committing these acts manage to escape  Plead innocence  Claim Negligence 

Fraud – An economic offence  Is a criminal act  Similar to other economic offences: - Money Laundering - Financing of anti-national activities - Corruption - Bribery

Components  An individual or organization intentionally makes

an untrue representation about an important fact or event 

The untrue presentation is believed by the victim



The victim relies upon and acts upon the untrue representation



The victim suffers loss

Types of frauds  Employee

frauds

 Management  Cyber

frauds

frauds

Types of employees frauds Defalcation Inflating

of cash

the payments

Suppressing Teeming

the revenues

& lading

Misappropriation

of assets and services