Financial Irregularities to be Examined by Fraud Examiner

Discussion Questions
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Discussion Questions
Response to Question 1
The irregularities that a fraud examiner should look for in areas where physical cash is used include errors and omissions, and oddities. An oddity is an oddity notwithstanding the amount of cash involved, and fraud examiners should not pass by small oddities such as $3,000 simply because they are not material to the fiscal statements taken as a whole (Wells, 2012). Fraud examiners should also look for misstatements; unjustified or excessive cash transactions; inconsistencies between bank deposits and deposits recorded in the company books; inaccuracies in the ledger accounts; embezzlement; and manipulation, falsification, or alteration of documents or records.
Response to Question 2
The irregularities that a fraud examiner should look for in a company’s accounts payable area include fictitious vendors or shell organizations within the master file. Although the entries can be legitimate, they can actually point to a considerable fraud scheme. For example, a fabricated vendor could be a duplicate vendor who has been created by accident because the vendor sent an invoice to the company with a somewhat different name, or the entry may have been created by a manager in order to conceal a multi-year fraud scheme (Association of Certified Fraud Examiners, 2012). Investigating is the only way to be sure. Another irregularity the fraud examiner looks for is financial misstatements, which are essentially warning signs that could just as much be the result of fraud as of clerical error (Howard, 2010). The other irregularities are suspicious payment, improperly capitalized expenditures, current expenses that have been shifted into later periods, and recording vendor discounts as income.
Response to Question 3
Irregularities in payroll are worthy of examination. These irregularities include the following: staff members without or with few payroll deductions; budget variations for payroll by cost center; overtime charged during a slack period; and inconsistent overtime hours for a cost center (Association of Certified Fraud Examiners, 2012). Other irregularities are staff members with duplicate names, addresses, and Social Security numbers; and overtime charged for staff members who usually would not have overtime wages (Howard, 2010).
Response to Question 4
Mischaracterized expense schemes usually happen whenever a staff member requests reimbursement for a personal expense and claim the expense as being business related. The internal controls that can be put into place for preventing a worker from committing a mischaracterized expense scheme include the following: (i) establishing and adhering to a system of controls; (ii) Requiring detailed expense reports with original support documentation. (iii) Establishing a policy which explicitly specifies what would and what would not be reimbursed (Association of Certified Fraud Examiners, 2012). (iv) Requiring direct supervisory review of all entertainment and travel expenses. (v) Comparing dates of claimed expenses to work schedules; (vi) scrutinizing any expense report that is approved outside the department of the requestor; and (vii) comparing the expe...