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The cashier of a firm who also acts a bookkeeper has been suspected of dishonesty. The books have not been audited for the last nine...

      

The cashier of a firm who also acts a bookkeeper has been suspected of dishonesty. The books have not been audited for the last nine months. You have been asked to investigate the records to establish whether the cashier has committed a fraud

Required:
Outline how you would proceed with the investigation

  

Answers


Wilfred
An investigation may be defined as an inquiry into the financial affairs of a business, including the examination of its audited accounts for recent years and its current and estimated future position as will enable the investigating accountant to ascertain and Marshal in his report the information relevant to the investigation.
The nature and scope of a fraud investigation are dependent on the instructions given. The main problems usually are:
a) The past time period that needs to be investigated. This could be a few or many years.
b) The scope of the investigation. We have to determine whether we are investigating an individual, a whole company, a whole department or a group of companies.
c) The question of individuals. This can be a very painful exercise and the following general rules can be helpful:
i. The questioner should have a colleague present;
ii. The person being interviewed should be allowed to have a friend present;
iii. Accusations should not be made but evidence should be presented and explanations requested;
iv. The questioning should be in private;
v. If necessary, judge‘s rule should be observed. This means that a person being questioned understands the nature of the
question and should not unwittingly incriminate himself;

There are two categories of fraud
a) Fraud involving the manipulation of the records and the accounts usually by the company‘s senior officer with a view to benefiting in some way from the false picture which they convey.
b) Frauds usually by employees involving the theft, misappropriation or embezzlement of the company‘s funds usually in the form of cash or other assets.

The cashier who keeps books of accounts might have misappropriated cash in any of the following ways:
1. Omitting to enter the receipt of cash
2. Entering less amount in the cash book than what has been received
3. Showing fictitious payments
4. Entering more amount in the cashbook than what has actually been paid

The investigator should follow the line of actions detailed below:-
1. Permission should be obtained from his client to issue a circular to the debtors and creditors asking them to confirm the balance owing by them or to them respectively.
2. He should pay attention to cash sales and see whether there is a loop hole. If so, he must probe into the matter.

The investigator should pay special attention to the following points:-
1. Remuneration of the directors, managing agents etc
2. Whether the funds of the company are properly and profitably employed.
3. Loans advanced to the directors of the company interest charges thereon, and the security offered by such a director.
4. The current account of the managing agents with the company
5. The contracts entered into by the managing agents with other companies in which such managing agents or directors are interested.
6. The assets and liabilities should be verified and valued.
Wilfykil answered the question on February 21, 2019 at 06:29


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