Internal Accountant's Report to Management (Essay Sample)

Internal Accountant’s Report to Management
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Internal Accountant’s Report to Management
Section I: The effect of occupational fraud and abuse on the company
Audited business organizations are known to incur less severe fraud losses relative to companies that are unaudited. Occupational fraud is basically understood as using one’s occupation for personal enrichment by deliberately misapplying or misusing the assets and/or resources of the employing organization (Wells, 2010). Occupational fraud and abuse comprise various misconduct by company employees, managers, and executives and ranges from petty theft to sophisticated investment rip off. Finding out the full cost of occupational fraud and abuse is a crucial part of understanding the depth of this problem.
The effect of occupational fraud and abuse is substantial, and the effects go direct to the company’s bottom line. It raids profit of companies and deprives the business organization the investment and growth that it deserves. Moreover, occupational fraud and abuse is costly in many ways considering that a company’s productivity, reputation, and security are actually damaged (Ratley, 2012). Companies lose business revenue as a consequence of occupational fraud and abuse. In essence, occupational fraud and abuse lead to substantial financial loss for the company, and roughly 49 percent of companies that have been victimized fail to recoup any fiscal losses. It is of note that 40 percent to 50 percent of all victims of occupational fraud and abuse are not compensated for their financial damage (Wells, 2010). Small companies are usually the most susceptible to occupational abuse and fraud since small companies are inclined to trust their workers more, and they therefore let their guard down. Given that occupational fraud and abuse intrinsically involves efforts at concealment, most of fraud cases would never be discovered, and of those that are actually detected, the total amount of losses may never be reported. As a result, attempting to quantify the degree of all fraud and abuse losses would be, at best, an approximation (Ratley, 2012).
Section II: U.S. governmental oversight of accounting fraud and abuse and its effect on the company
The Sarbanes-Oxley Act (SOA) that was enacted in the year 2002 was aimed at curbing accounting fraud. It was also intended to make fiscal statements more understandable and transparent, and to hold the directors and executives of companies responsible (Ratley, 2012). The Sarbanes-Oxley Act impacts the company in that it forces the company’s employees, managers and executives to act in an ethical manner since failing to comply to this rule amounts to violating criminal law and they may actually be imprisoned (Wells, 2010). Several provisions of SOA such as certifications of business financials by finance chiefs and chief executives, empowered and independent audit committees, director and officer bars, as well as the FAIR fund have a positive and highly powerful impact. In essence, the improved fiscal reporting, and more engaged and active boards may help to minimize accounting fraud as well as abuse in the company (Ratley, 2012). A significant provision of the SOA is that it actually created the Public Company Accounting Oversight Board (PCAOB), which is aimed at preventing auditing abuses for instance those seen at Enron. The United States government has also pt in place several new requirements for accounting firms and their clients. For instance, an organization is prohibited from employing an accountant who has audited the company within the past year (Wells, 2010).
Section III: Potential corruption schemes to be aware of in the company
The potential schemes include billing schemes, corruption schemes, check tampering, payroll schemes, skimming, expense disbursements, fraudulent statements, noncash misappropriations, register disbursements, and cash larceny. In essence, there are 3 main classifications of occupational fraud that the company has to be aware of. (i) Asset misappropriations schemes: these basically involve misuse or theft of a company’s assets through several means for instance stealing inventory, skimming revenues by stealing cash from a company before the money is recorded on the company’s records and books, and/or committing payroll fraud. Cash misappropriations often occur through cash larceny, whereby money is stolen from a company after the cash has been recorded on the company’s records and books (Ratley, 2012). Fraudulent disbursements occur when a fraudster causes her company to disb...