Please review the following from the ACFE 2018 Report to the Nations and add to my summary below regarding your posting about an effective control system and the role management plays.
Beware of the Tone at the Top
Thirty percent of the responses denoted lack of internal controls contributes to fraud, while 19% of the responses denote override of existing controls as a contribution to fraudulent behavior. Also, if the tone at the top is negative, this is another weakness. Poor tone at the top is to blame for 23% of internal control weakness for financial statement fraud, 18% for corruption and 9% for asset appropriation.
***MY POST BELOW***
The financial analysis of an organization indicates the financial health of the organization, which gives an overview of the firm’s growth and sustainability in the long term. Financial fraud affects financialanalysis by creating a false picture of the revenues, the profits, solvency, operational efficiency, capital efficiency and liquidity (Seitz, Oeding, &Weise, 2015). As a fraud investigator, I would use liquidity analysis as a component of financial analysis to support my investigation for two reasons. Firstly, these ratios measure the ability of a firm’s cash to offset its expenses. Notably, fraud may adversely affect the cash and liability accounts, which will, in turn, be visible for scrutiny. As well, this fraud will reduce the firm’s interest coverage ratio implying that my evidence will support the firm’s inability to pay its interest expenses on time.
According to Seitz, Oeding, and Weise (2015), a firm must uphold its investors’ rights by maintaining an effective control system that provides a platform for whistleblowers to provide beneficial information in preventing financial fraud. In the light of the case scenario, it is clear that improper depreciation occurred; there was embezzlement of funds and mismanagement of inventory. As such, I used the financial dashboard tool to maintain snapshots of the firm’s financial health to identify instances of fraud. As well, the expense tracking tool provided expense recording software that keeps a record of all cash expenses. Finally, I applied the liquidity analysis that is a component of financial analysis to identify the current and the interest coverage rations necessary to investigate the firm’s liquidity.
Seitz, J., Oeding, J., & Weise, M. (2015). Is it ethical for the U.S. government to offer financial awards to potential whistleblowers of financial statement fraud and internal control violations? Journal of Theoretical Accounting Research, 10(2), 68-90.
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