...different accounting records which can be used in MonteHodge: Accounting is a crucial discipline for keeping track of quantifiable factors for a business or individual. Accountants are primarily employed to track the flow of money through an organization. In some cases, they are charged with ensuring legal compliance. In others, they are more specialized in optimizing that cash flow. Accountants also organize and aggregate financial information and produce reports for people less experienced in the discipline. (Source: Purpose of Accounting | eHow.comhttp://www.ehow.com/about_4679149_purpose-accounting_.html#ixzz22YwT2kpu ) The accounting system for your business consists of several types of records. Although there are many types of underlying financial records, such as invoices, journals, and receipts, the major accounting records are types of financial statements that summate the financial status of a business. Each type of accounting record details certain information about your business, and each is used for a different purpose, but each type is also linked to another record in your set of financial statements. Although modern accounting software creates these statements automatically based on transactions you enter, it’s still important to understand how each type of accounting record is used. Income Statement The income statement lists all your business income and expense transactions. It is also known as a profit and loss statement. This type of accounting record...
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...Introduction……………………………………………………………………………………..1-2 Issues………………………………………………………………………………………………2 The Discovery of Fraud……………………………………………………………………..…..3-4 Corporate Governance of FCB……………………………………………………………………5 Auditor Dilemma……………………………………………………………………….……….5-7 Using the Fraud Triangle Model to analyze the situation in Flat Cargo Berhad……………..…8-9 Who is responsible in the fraud of Flat Cargo Berhad ……………………………………..…10-11 Prevention Measures for Fraud ……………………………………………………………….12-13 Detection Measures for Fraud…………………………………………………………...……14-15 Recommendation…………………………………………………………………….……….16-17 Conclusion…………………………………………………………………………...……….18-19 References………………………………………………………………………………………..19 Introduction The case is related to one company known as Flat Cargo Berhad (FCB), FCB was one of the largest air freight companies in Malaysia which servicing several government linked companies including Freight Malaysia Berhad. FCB is a listed company and was registered as an investment holding company with several subsidiaries. Among its subsidiaries are FC Spare Sdn Bhd, Cargo Management Sdn Bhd, FCB (SPV) Ltd, Cargo Air Services Sdn Bhd and FC Air Ltd. FCB started its operations in 1997 with two aircrafts: a Boeing 737-200F and a Cessna Grand Caravan. FCB’s major shareholder in 1997 had been Bangor Berhad, which was part of a diversified international family owned conglomerate, the Miri Group. On September 2001 the company was listed in Bursa Malaysia. The main core business was to provide air freight transportation...
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...Commission, the answer was 10 cents less than the expected 82 cents that the company was expected to pay. To cover the difference, Mr. Neil devised a plan to put the extra cost into the following year which all the company the report better-than-expected results. The alleged fraud gave the company a string of earning beats and a strong rise in its stock. It also allowed Diamond Foods Inc the necessary currency needed to clinch a deal to buy the Pringles snack brand from Proctor and Gamble for $2.35 billion. Everything unraveled after the Wall Street Journal and some skeptical investors questioned the company’s accounting. According the Diamond Foods Inc, they conducted an internal investigation and ultimately restated its finances for the 2010 and 2011 fiscal years. The restated numbers showed the stock price per shared dropped from $90 a share to $13 a share. The fraud also had a negative impact on acquiring the Pringles snack brand. Diamond fired Mendes and Neil in early 2012 and restated its earnings after an internal probe concluded that the accounting was improper. (Hamilton, 2014) On January 9th 2014, the Securities and Exchange Commission charged Diamond Foods and its former SFO in an accounting scheme to falsify walnut costs in order to boost earnings and meet estimates by stock analysts. The SEC also charged Diamond’s former CEO for his role in the company falsifying financial statements that were filed with the SEC. Diamond Foods agreed to pay $5 million to settle...
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...was EVP and a board member along with James Rigas (son) (USA Today, 2004). Together they owned the majority of Adelphia's stock and occupied the majority of the seats on the board. These two components would be key in the fraud that would ensue. The personal lives of the Rigas’ would be the root cause of their need for cash and the reason behind the fraud they would commit (USA Today, 2004). The Scandal The government described it as ''one of the most extensive financial frauds ever to take place at a public company" (Sorkin, 2004). The Rigas' used company money to construct a private golf course, own several private jets, and purchase multiple several luxury homes. They were able to do this by establishing "complicated cash-management systems to spread money around to various family-owned entities and as a cover for stealing about $100 million for themselves" (AP, 2005). In order to keep investment money flowing in, they would manipulate the books to meet analyst expectations, thus inflating the stock price and at times they would mix Adelphia's funds with their own private funds. Upon realizing the amount of funds that had been taken, Tim Rigas "limited" the amount of money his father could take to $1,000,000 per month. One example of the fraud they committed was they disguised Adelphia's actual expenses for digital decoder boxes. In 2001 the company claimed that it sold 525,000 boxes for $101 Adelphia million to an unaudited Rigas-owned company that has no cable...
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...Introduction As we enter new millennium, it is a fact that the user of financial statement demanded more on audit function to implement audit attestation towards company’s financial statement whether for public listed or private company. It is due to their awareness of having a true and fair presentation of financial statement since they evaluate the company’s performance based on the company’s earnings which used to be the point at which the investors can make decision whether to invest or not. However, the case of fraud and manipulation in a company are still critical and need to be monitored by certain functional department as such to be the whistle blower for any irregularities that may arise in the company. In fact, over the last decade, there were various regulatory agencies and interest groups in existence which had been aggressively promoting the idea of an effective audit committee in all public listed companies. Yet, the absence of audit committee in a private company might be the cause for unstoppable practices of fraud. Therefore, the objective of this study is to determine whether the new theory of this formation of audit committee in a private company, can really help to eliminate or at least minimize the fraud. To achieve this goal, the study will conduct a survey based on questionnaires that will be distributed to the top management of a private companies, charted accountant i.e auditors and lecturers of audit course. The findings will be used to support the...
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...an efficient accounting system. The need for the internal control systems in the organizations, especially banks, cannot be undermined, due to the fact that the banking sector, which has a crucial role to play in the economic development of a nation is now being characterized by macro economic instability, slow growth in real economic activities, corruption and the risk of fraud. Fraud, which is the major reason for setting up on internal control system, has become a great pain in the neck of many Nigerian bank managers. It has also become an unfortunate staple in Nigeria’s international reputation. Fraud is really eating deep into the Nigerian banking system and that any bank with a weak internal control system, is dangerously exposed to bank fraud. The CBN reported that cases of attempted fraud and forgery in banks, as at half-year 2007 have surpassed what was recorded for the whole year 2006. The CBN half-year report for 2007, revealed a total of 741 cases of attempted fraud and forgery, involving 5.4 billion, $35,406.1, 150 Euros were reported as at June, 2007. In 2006, 1,193 cases were reported involving 4.6 billion, $1.8 million and 14,389.7 pound sterling. The CBN also reported that the backward development was attributable to weaknesses in the internal control systems of the banks. This has clearly pointed the picture of how fraud has penetrated in the financial strength of Nigerian Banks. In a nut-shell, the damage which this menace, called fraud has done to...
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...This has clearly pointed out the picture of how fraud has been penetrated in the financial strength of Nigerian Banks. In a nut-shell, the damage which this menace, called fraud has done to the banks is innumerable and needs urgent attention. Therefore, the attempt to put an end to this economic degradation, gave rise to the topic of this research study the impact of internal control in the banking sector in Nigeria with Wema Bank of Nigeria PLC as a case study. However, this study is aimed at verifying the conception that an effective and efficient internal control system is the best control measure for preventing and detecting fraud, especially in the banking sector. Data captured for this study, were analyzed through descriptive and inferential statistical methods. The descriptive analysis involves the use of percentages, tabulation and graphical presentation. While the inferential statistical method involved the use of the chi-square. The functions of fraud prevention, detection and control are interwoven, as the three works together to eliminate fraud and fraudulent tendencies. Therefore, internal control is highly significant in fraud detection and preventions in banking sector in Nigeria. | | | INTRODUCTIONInternal control, the strength of every organization, has become of paramount importance today in Nigerian banks. The reason being that the control systems in any organization is a pillar for an efficient accounting system.The need for the internal control systems...
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...the corporate scandals that have been emphasized by the media. After all the recommendation and efforts contributed by the various parties to eliminate these scandals, however it is still happening and there is no sign of stopping or reduction of the fraud in the future. Though GP Ocean Food Sdn Bhd is a well-known company, but the former company directors of seafood exporter have been acquitted of charges of submitting misleading information to the Securities Commission (SC) in 2006. Some even were charged with bribing case in order for their company to get listed in Bursa Malaysia. The company was highly involved with various allegations of corruption and irregularities. Besides, GP Ocean was scheduled to be listed in July 2006, but the company announced a rescheduling of that event in early June which was two weeks before its pamphlet was to be launched. After the approval of the list by the Securities Commission (SC) in early April 2006, the Securities Commission began to receive lots of complaints regards the company’s possible irregularities in the firm’s financial statements. The Securities Commission started to investigate the complaints and further their research by raiding the offices of GP Ocean. Causes Corporate governance is designed to...
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... 16 a) As the auditor, describe the concerns you have that may suggest fraud is occurring in the company. The Fraud Triangle ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley The fraud triangle originated from Donald Cressey's hypothesis (Donald R. Cressey, 1973). The fraud triangle is a model for explaining the factors that cause someone to commit occupational fraud (acfe, n.d.). Type of fraud: Management fraud Fraudulent financial reporting Misappropriation of assets. (Arens/Elder/Beasley, 2012) ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley At the types of fraud, usually the Management fraud are including fraudulent financial reporting and the misappropriation of assets. Why the company will occurs the fraud, because the employees and managers have incentive, opportunities and attitude. The fraud specific fraud risk area are including revenue and accounts receivable fraud risk, inventory, purchases and other area Management fraud Management fraud, as the name suggests, is perpetrated by the top management of a company who has the intention of misleading investors (Dutta, 2013). Usually management fraud by accounting manipulation and misstates the...
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...“Critically discussed if there are real reasons why institutional investors should be concerned about the independence and genuine effectiveness of the audit function? Search the findings of academic papers and other published sources to support your view.” Introduction An institutional investor is an organization that invests on behalf of the organization’s members. These investors are a part of corporate governance for companies and they have large amounts of money to invest. In Malaysia, there are five leading institutional investors; Employees Provident Fund of Malaysia (EPF), Pertubuhan Keselamatan Sosial (Social Security Organisation), Lembaga Tabung Haji (Pilgrimage Board), Khazanah Nasional, Permodalan Nasional Berhad (National Equity Corporation) and Lembaga Tabung Angkatan Tentera (Armed Forces Fund Board) have taken various measures over the years to put better governance practices in their investee companies. As they can afford to buy more shares and bonds, sometimes automatically put them as majority and proactive shareholders. They have power to influence over management decision making, conduct regular engagements with management of companies, placing new shares, demand meetings with the senior managements of companies regards to their performance, vote on key issues at general meetings and communicate on other matters affecting shareholders' interest. The institutional investor which is an external party that are independence from the management can be seen...
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...BAC4664 – Internal AuditingSection B01DTrimester 3, 2014/2015 | Internal Auditor and Whistleblowing Policies | Group Assignment | | Prepared by:Gabriella Rena Vanessa Darmadji 1121116458Nur Aida Binti Mohd Jasmin 1121118345 | | | Multimedia University Cyberjaya 2015 | INTRODUCTION Fraud negatively impacts organizations in many ways including financial, reputation, psychological and social implications. According to various surveys, monetary losses from fraud are significant. Thus, the organization has to establish an effective fraud management program that also covers the organization response to the whistleblower in the company. It is clear that corporate have major responsibility in their response of complaints regarding accounting, internal accounting control or audit matters where they have to establish audit procedure for the receipt, retention and treatment of complaints. Moreover, the organization has to build appropriate structure of line of reporting for the internal audit to support the effective fraud management program. The report discuss in deep on the Sarbanes Oxley Act 2002 in relation with bursa listing requirement. Furthermore, the whistleblowing also become the main issues on this report. The thorough discussion about what whistleblowing is and the key characteristics to support good whistleblower hotline also is conferred. REPORT Summary and compare the requirements of section 301.4 of the Sarbanes Oxley Act 2002 and compare those...
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...Accounting Information Systems Accounting Information System Tutorial 3 Answers 5.4 Environmental, institutional, or individual pressures and opportune situations, which are present to some degree in all companies, motivate individuals and companies to engage in fraudulent financial reporting. Fraud prevention and detection require that pressures and opportunities be identified and evaluated in terms of the risks they pose to a company. Adapted from the CMA Examination. a. Identify two company pressures that would increase the likelihood of fraudulent financial reporting. b. Sudden deceases in revenue or market share Financial pressure from bonus plans that depend on short-term economic performance Intense pressure to meet/exceed earnings expectations or improve reported performance Significant cash flow problems; unusual difficulty collecting receivables or paying payables Heavy losses, high or undiversified risk, high dependence on debt, or unduly restrictive debt covenants Heavy dependence on new or unproven product lines Severe inventory obsolescence or excessive inventory buildup Highly unfavorable economic conditions (inflation, recession) Litigation, especially management vs. shareholders Impending business failure or bankruptcy Problems with regulatory agencies Unusual spikes in interest rates Poor or deteriorating financial position Identify three corporate opportunities that make fraud...
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...FRAUD BASICS WHAT IS FRAUD? Fraud, sometimes referred to as the fraudulent act, is an intentional deception, whether by omission or commission, that causes its victim to suffer an economic loss and/or the perpetrator to realize a gain. A simple working definition of fraud is theft by deception. Legal Elements of Fraud Under common law, fraud includes four essential elements: 1. A material false statement 2. Knowledge that the statement was false when it was spoken 3. Reliance on the false statement by the victim 4. Damages resulting from the victim’s reliance on the false statement In the broadest sense, fraud can encompass any crime for gain that uses deception as its principal technique. This deception is implemented through fraud schemes: specific methodologies used to commit and conceal the fraudulent act. There are three ways to relieve a victim of money illegally: force, trickery, or larceny. Those offenses that employ trickery are frauds. The legal definition of fraud is the same whether the offense is criminal or civil; the difference is that criminal cases must meet a higher burden of proof. For example, let’s assume an employee who worked in the warehouse of a computer manufacturer stole valuable computer chips when no one was looking and resold them to a competitor. This conduct is certainly illegal, but what law has the employee broken? Has he committed fraud? The answer, of course, is that it depends. Let us briefly review the legal ramifications...
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...Seetharaman and Tan Wei Khong Faculty of Management, Multimedia University, Cyber Jaya, Malaysia Abstract Purpose – To highlight the pressures that the auditors would face in the era of globalisation and the challenges they should be willing to accept in order to maintain trust and integrity. Design/methodology/approach – A wide range of articles and journals published in international journals as well as local journals has been reviewed. The areas covered include audit fraud, true and fair view interpretation, auditor independence and role of internal auditors. Further, ideas have also been obtained from critical write-ups in the business magazines on the fall of multinationals. Findings – A wide range of interpretation has been given by various groups of people on their understanding of the phrase “true and fair”. This has created great confusion as to the interpretation of the audit reports. This has been proven by the fall of many multinationals and the audit pioneers, Andersens. This is one of the causes of audit fraud and it is also seen that as the auditors face an enormous challenge as they enter the twenty-first century, they should be willing to change their attitudes towards their clients. Professionalism should be in the forefront, and an overhaul in the concept of “true and fair” could probably be the solution to harmonisation of the economy. Research limitations/implications – This paper lacks statistical data on the views of the authors. It is based purely on secondary...
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...process of auditing a listed company. These issues could be created either intentionally or the other way around. Therefore, an objective analysis is needed to clear the puzzles especially if the auditors wish to curb fraud cases among their clients. In the case of Flat Cargo Berhad (FCB), the auditor has found some inconsistencies in the accounts of FCB. Thus, a case study is conducted to bring the hidden mystery to the light as possible. Based on the study, a report was written to summarise the situation. The aspects that were given highlights in the report included the issues contributing to those inconsistencies and the possible reasons that have led to this situation. Based on the identified problematic issues, several possible solutions have been suggested to overcome the said problems. Finally, an objective conclusion is made to make a stand about the given case study. This is important as it could facilitate the auditor to make an appropriate decision for the said case. B. COMPANY BACKGROUND Flat Cargo Berhad (FCB) was established in 1997 as the mean of providing air freight services to the Intra-Asia air market. FCB’s services were not only limited to air freight and aircraft ground handling but also included aircraft charter and leasing. FCB was chaired by Dato’ Ibrahim Samad, a former Director General for the Ministry of Transportation and former President of Malaysian Chamber of Commerce. He was the company’s Independent Non-Executive...
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