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Fraud Detection

The Public Company Accounting Oversight Board made a bold statement concerning the scope of management's assurances when they added "and the likelihood of fraud" to their requirement on the integrity of the direct preparation of financial statements.

Our certified forensic accountants and fraud examiners know full well that fraud can occur during the process that directly prepares financial statements and at internal and external entry points to the supply chains of goods and services that each business needs to purchase. Many of the methods that affect a successful fraud hinge on a person or persons' ability to alter the trail of transactions. Once again, we reflect on the fundamentals. Is management's separation of duties' definitions granular enough and are critical accounting tasks keenly separated? If so, are these separations accurately and completely implemented in the network and application security profiles?

Finally, is there a possibility that two or more employees conspire to defeat well-implemented separations and create fraud? How do we go about obtaining the assurances we need to determine if the likelihood of fraud is nil? Again, we turn to an accurate and comprehensive risk assessment of both internal and external accounting procurement processes to determine the risk of fraud for each activity and test critical aspects of these control measures.

For instance, could fraud in your procurement supply chain lead to fraudulent equipment purchases, and therefore overstate your depreciation schedules?

"Once FDC Associates confirmed that the 3 way compares, between a purchase order, receiving documentation and invoice agreed for a sample of valve purchases, they tested the serial numbers of these valves and discovered that our firm had purchased the same $400,000 valve 12 times! In reality the valve had been rebuilt, salvage value entered into our system and the "old serial number" taken off the book, and re-entered as a new valve. The rebuilt valve re-appeared as a new, fully-depreciable asset on our books. With this simple test, we uncovered a significant fraud and put an end to it."

Let FDC Associates' expert team give you confidence that the likelihood of fraud in any aspect of your business is under control. For more information on how FDC Associates can be your IT Audit and Governance Solutions provider, complete an Information Request or Contact Us.