Fraud

Fraud is an intentional and those mistake which are committed knowingly with some vested interest. It is difficult to detect fraud. Fraud may be the following types:

a) Misappropriation or Embezzlement of Cash:

In small types of business, the possibility of misappropriation of cash can be easily detected because of direct control owner in cash but in big business, there is no direct control of owners and chances of misappropriation of cash is more. The misappropriation of cash can be made in the following ways:

1. By omitting to enter receipt.
2. Cancelling the purchase returns.

Such frauds can be detected by;

1. By examining the cash book.
2. By checking receipt.
3. By checking debtors account and cash account.

b) Misappropriation of goods:

Fraud may be in respect of goods. This types of fraud is difficult to detect unless a proper stock record is kept. The goods may be removed by junior staff or by senior officers. The auditor can detect these types of fraud by undertaking through record checking and the physical verification of the goods.

c) Manipulation of accounts:

These types of fraud is always intentional, pre-determined and is more difficult to detect as it is usually committed by higher managerial person such as directors and managers. Some examples are as follows:

1. Recording fictitious purchase.
2. By undervaluation or overvaluation of assets and liabilities.

The detection of these frauds requires careful and searching enquiries as they are committed by responsible officials.