solved 1. What is fraud? Who perpetrates it? What is its

1. What is fraud? Who perpetrates it? What is its impact on business? Why does fraud still persist after the scandals of WorldCom and Enron in the early 2000s and the passage of Sarbanes-Oxley?
2. Class….. Let me get us started:
Skimming – An “off-book” fraud scheme that is manifested by the theft of cash from a victim entity before it is entered into the accounting records. Various types of sales skimming schemes include:33
Fraud is an intentional act by one or more individuals among management, those charged with governance, employees, or third partit’s, involving the use of deception to obtain an unjust or illegal advantage.
Fraudulent financial data reporting process which can be done through manipulation of books, records and documents, omission of certain transactions, misapplication of accounting principles (of course when these are done intentionally).
The two analytical tests for detection of fraud are as follows :-
1. Sureprise checks
2. Walk through test or Examination in depth
1. Surprise checks:-The auditor visiting the premises of client without giving prior intimation. Surprise checks are a part of normal audit procedures. An element of surprise can significantly improve the audit effectiveness. Wherever, practical, an element of surprise should be incorporated in the audit procedures.
The following are the important recommendations:-
1. The element of surprise in an audit may be, both in regard to the time of audit. That is selection of date of surprise checks) and selection of areas of check.
2. Areas of surprise check :- the areas over which surprise checks should be employed would depend upon the circumstances of each audit but should normally include:-
A. Cash and investment
B. Stores and inventories
C. Books of prime entry and statutory registers
D. Internal controls and internal checks