Accounting Fraud

Accounting Fraud

1. It is the action of enriching oneself through dishonest operations.

   • This has three factors:
     • Opportunity
     • Rationalization
     • Financial Pressure
   • Fraud occurs when the entity lacks efficiency and adequate internal controls.
     • Therefore, it is recommended
       • Evaluate and constantly innovate the Internal Control
       • Periodically perform External Audits
       • Safeguard the emphasis of compliance with the internal policies of the company
     • The Internal Control consists of five components
       • Control Environment
       • Risk Assessment
       • Control Activities
       • Monitoring
       • Information and Comunication
       • In turn, these contribute to promote principles such as:
         • Establishment of responsibility
         • Segregation of functions
         • Documentation procedures
         • Physical controls
         • Human resource controls
         • Independent internal verification
       • However, the control has limitations such as:
         • Cost should not exceed benefit
         • Human element
         • Size of the business