Types of Fraud

REVENUE CYCLE

SALES Cash Collection

1. Recording fictitious sales
2. Recording validations twice
3. Recording of sales in improper cut off
4. Recording deposits as sales
1. Skimming with holding cash w/o recording
them
2. Lapping
3. Kitting(Take advantage of the float or number
of clearing based of a bank)

EXPEDITURE CYCLE

PURCHASES
1.Paying for fictitious purchases
2.Receiving kickbacks
3.Purchasing goods for personal use
PAYROLL
1. Fictitious employees
2. Excess payment to employees
3. Failure to record payroll
4. Inappropriate assignment of labour cost
to inventory.

INVENTORY WAREHOUSING

1. Inventory theft
2. Overstatement of inventories

INVESTING

 same with the purchase

FINANCING

1. Diverting proceeds
2. Covering up a failure to meet debt obligation
3. Failure to record obligation and /or interest
4. Paying to inappropriate parties

REGULATORY BODIES

1. Top –Audit committee(BSP)

2. Middle – report to top or if top committed fraud report to regulatory bodies
3. Bottom – report to middles

Rationalization
(motive)
Incentive (Pressure
to commit)

LIMITATIONS OF INTERNAL CONTROL

1. ERRORS BY PERSONEL – many of accounting controls are dependent on the work of an

accounting personnel
2. Proper segregation of duties