Month: November 2009

Answer: What items to be included in a usual partnership agreement? Generally, the following are the important items that need to be included in any partnership agreement: Amount of capital to be contributed by individual partner; Profit sharing ratio; Salaries to be paid to the partners; Interest on capital contributed; Interest on loans from partners … Read more

As we know, fraud can come in a variety of different forms and can happen at all levels in an organization.  In a survey undertaken by Ernst and Young they found that 75% of the sample of 1,200 companies world-wide were victims of fraud during the last 5 years. Of the worst fraud over 80% … Read more

What can we do to prevent fraud? Prevention comes from:- (a) The awareness of the circumstances where the risk of fraud is higher as well as (b)  Be aware of the various types of fraud, which could be perpetrated and Below are some of the possible strategies to prevent fraud: POSSIBLE STRATEGIES TO PREVENT FRAUD:  Two … Read more

We frequently hear term money laundering and the extreme of these money being used for terrorism purpose. Regulators in US, UK and many other countries have instituted strict law and regulation of which the responsibility is placed heavily on financial institutions to have controls in place so as to frustrate such money laundering activities and identify … Read more

We often hear of one common accounting fraud which is called Teaming and lading.  So what is Teaming and Lading? Teaming and lading is a term normally used for “borrowing” from cash to repay by cheque at a later date. When a business received incomes receipts, it can come from both cash and cheques and … Read more

Example of such Accounting Fraud AREAS AND COMMON METHODS USED TO FRAUD Bre-X Minerals   AREA: OVERALL MISREPRESENTATION There are three (3) categories of disclosure frauds which comprises the following: Overall misrepresentations about the nature of the company or its products, usually made through news reports, interviews, annual reports, and elsewhere Misrepresentations in the management … Read more

Example of such Accounting Fraud AREAS AND COMMON METHODS USED TO FRAUD PharMor     AREA: MANIPULATION OF INVENTORY AND OR COST OF GOODS SOLD Over-counting physical inventory, Over-valuation of inventory, Not writing off obsolete inventory, Not providing for slow-moving inventory, Incorrect costing of inventory, Record fictitious inventory into the books of account, Under-record purchases, … Read more

Example of such Accounting Fraud AREAS AND COMMON METHODS USED TO FRAUD Enron   AREA: UNDERSTATING LIABILITIES/EXPENSE FRAUD Not recording accounts payable Not recording accrued liabilities Recording unearned revenues as earned Not recording warranty or service liabilities Not recording loans or keep liabilities off the books Not recording contingent liabilities

Example of such Accounting Fraud AREAS AND COMMON METHODS USED TO FRAUD WorldCom   AREA: OVERSTATING ASSETS Overstatement of current assets (e.g. marketable securities) Overstating pension assets Capitalizing as assets amounts that should be expensed Failing to record depreciation/amortization expense Overstating assets through mergers and acquisitions Overstating inventory and receivables

Example of such Accounting Fraud   AREAS AND COMMON METHODS USED TO FRAUD     GLOBAL CROSSING &  QUEST   AREA: SALES MANIPULATION Recording fictitious revenue ( related parties, sales with conditions, consignment or sham sales), Recognize revenues too early by having improper cut-off, Overstating real revenue by altering contracts and inflating the amount, etc) … Read more