Consider how an organization must manage cash and receivables. Which of the two is the most important to manage? Is one more susceptible to fraud and errors than the other? Explain your answer. How would a misstatement in each affect an organization?
Consider how an organization must manage cash and receivables. Which of the two is the most important to manage? Is one more susceptible to fraud and errors than the other? Explain your answer. How would a misstatement in each affect an organization?
How an organization must manage cash and receivables?
Cash and receivables management is important for the smooth running of an organization. A business faces lot of fraudulent activities from inside and outside, among that cash and receivables are more susceptible to fraud. If an organization don’t recognize and address cash frauds and receivables frauds, it can suffer financially. Even worse, it will erode the reputation and damage the customer base significantly. Cash is easy to misplace and for one to take because it is much harder to track, so it is more susceptible to fraud than other.
Different types of Account receivable frauds
a) Creating bogus statement
One of the common types of fraud is creating bogus statement by altering small figures from number of accounts which is not easy to notice.
b) Check Skimming
An accounts division employee can takes an incoming check from an account and cashes and deposits it into their bank account. They cover up their crime by deflecting late notices and account statements.
c) Un authorized write off
An employee creates fraudulent write-offs by crediting an account for a discount, return or another type of write-off. It’s also used to cover up previous crimes
d) Payment diversion
This involves diverting incoming cash from old or slow paying accounts. If your business writes off uncollectible accounts, an employee can keep any funds received because an account receivable for the money isn’t on your books.
e) Fictitious accounts and sales
Sales persons or accountants may create fictitious customer accounts and sales to make bigger bonuses. If sales staffs are paid on volume vs. collections, they may collude with an accounts receivable specialist to ensure fraudulent sales.
Step by step
Solved in 2 steps
