Financial Statement Fraud Investigation Of Forensic Accountants

1000 Words Oct 23rd, 2015 null Page
Financial Statement Fraud Investigation
Frisbey (2015) indicated that forensic accountants should be able to effectively communicate with the management and involved personnel as to the factors of the existence of fraud indicators, to be able to perform essential analytics and independent testing such as horizontal and vertical testing techniques to detect fraud or to examine the validity of evidence being investigated (p.8-9). Frisbey mentioned that forensic accountants should, for example, request and review documents such as contracts and supporting invoices and deliveries; confirm with clients on the existence receivables and consignment contracts; research public records, conduct site visits, background checks of vendors; analyze journal entries with high and round dollars towards the end of reporting period; and obtain supporting documents for reversal and accrual entries (p.8-9). Frisbey implied that forensic accountants should consider utilizing data analytics and data mining software as a means of detecting fraud. Frisbey summarized that forensic accountants should be alert to warning signs and red flags on unusual and unexplained changes in ratios, such as: net profit margin, gross profit margin, and accounts receivable (A/R) turnover, turn cycle time of outstanding sales, sales return percentages, A/R Allowance, and bad debt expense or allowance percentage (p.9-10). Frisbey (2015) identified that excellent understanding of the enterprise-wide policies and…

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