Internal Accountant’s Report to Management
As the internal accountant of the European Newspaper Company, I have to perform various financial operations, and I am considered the expert in this field. As we all are faced with preparation for the upcoming government contract bid, we need to have a better understanding of how our company runs the business and issues that we can face if we enter into this contract. It is vital to visualize the actual impact of occupational fraud and abuse in the company. We also need to know how the US government oversees the accounting fraud and abuse and its affect on the company. What potential corruption schemes to be aware of within our company? What kind of accounting evidence and methods of gathering such evidence to support the financial status review to choose? All these topics need great discussion where managers can have a full understanding to be able to make their decision that can impact our company as a whole. Section I
The impact of occupational fraud and abuse on the company
The occupational fraud and abuse can have a shocking impact on the company. It can not only reduce the revenues, but it can also turn the profits into losses. To avoid the occupational fraud and abuse, the organization should follow different steps that help to recognize these problems before they arise. Several known methods can be used such as fraud schemes that are carried out by the purchasing department. These carried out in collusion frauds are the most financially harmful frauds because they can lead a business to lose up to 5% in the revenues. The most common types of occupational fraud and abuse are misappropriation of cash and corruption. Both misappropriation of cash and corruption can negatively affect the performance of the company. There are several kinds of corruption and they are bribery, illegal gratuities, extortion, and conflict of interest. These types of fraud can damage the cash resources of the company as well as reduce the profits. Other common types of occupational fraud and abuse are cash larceny, skimming, billing and payroll schemes, expense reimbursement, check tampering, and register disbursement schemes. Besides cash frauds, there are several non-cash frauds such as inventory fraud, misuse of non-cash assets, and targeting of intangible assets. Non-cash frauds can be damaging to the company. It can be harmful for the firm when the employees are borrowing company vehicles, supplies, computer, or office equipment without authorization. It is even worse if there is theft of inventory, fake sales, fraudulent requisitions of material, diversion of material from factory, and classifying inventory as damaged. Moreover, inventory can be stolen when the incoming shipment arrives. Or there is a false shipment of inventory followed by a preparation of a false packing slip. Non-cash fraud activities can greatly reduce the profits of the company.
U.S. governmental oversight of accounting fraud and abuse and its affect on the company
The US governmental oversight of accounting fraud and abuse has improved since the numerous fraud scandals prior to 2002 that were followed by the creation of the Sarbanes Oxley Act (SOX). The Public Company Accounting Oversight Board (PCAOB) is reporting to the government for disciplinary actions of the accounting companies. Furthermore, the SOX hold extra responsibilities for the Securities and Exchange Commission (SEC) to employ the rules on requirements to comply with the SOX. The government pays more attention of what is going on in the financial field, and is responsible for the oversight of accounting fraud. Moreover, the implementation of internal controls helps to reduce the possibility of fraud and to insure that the companies comply with the rules and not...