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A casualty loss is the damage, destruction, or loss of property resulting from an uncontrollable event that is sudden or extraordinary.  It can also be an order of the government to destroy or remove a structure for safety reasons because of a disaster.  These losses are considered a valid casualty, whether it is personal or business property, if they are as a direct result of a particular event that is sudden, unpredicted or destructive.  These events could be caused by fire, flood, earthquakes, theft or other similar events. Read the rest of this entry »

Most people find financial statements identical to a foreign language.  To ensure that financial statements are easier to understand, there is a set of rules and practices known as the generally accepted accounting principles (GAAP). Development of these rules provides a basic guideline accounting because I think it’s fair to say that it can get obtuse at times. There are a lot of variations to the meaning so here is the best answer.  It’s the generally accepted accounting rules and procedures that are necessary to define accounting practice. Basically it’s a set of theories that accountants come to accept, and controversies are lively with some methods between accountants. Read the rest of this entry »

How can I protect myself from fraud?

Unfortunately, fraud does sometimes happen in small businesses. It tends to happen when a busy business owner puts complete trust in someone, and completely ‘leaves them to it’. The employee comes to realize that no one is really checking or overseeing what they are doing, and when a grievance occurs or money problems arise at home, they  succumb to temptation. Read the rest of this entry »

Over the years there have been many a “scam” perpetrated upon the innocent, trusting public. The I.R.S. recently released the following:

Beware of Tax Scams! Don’t fall victim to tax scams. These schemes take several shapes, ranging from promises of large tax refunds to illegal ways of “untaxing” yourself.The IRS suggests that you remember three important guidelines:

• You are responsible and liable for the content of your tax return.

• Anyone who promises you a bigger refund without knowing your tax situation could be misleading you, and.. Read the rest of this entry »

Process of Proactive Detection of Fraud

1. Build the Proper Team

Regardless to the total size of the team, there should be at least three specific experts.  The first is a domain expert that has an inside perspective of the industry and the business.  The second is a technology specialist that is familiar with the system being used by the company.  Lastly there needs to be someone familiar with fraud and the symptoms involved with it. Read the rest of this entry »

Create & Maintain an Appropriate Culture

Culture is important in any organization but to have the appropriate attitude of honesty and high ethical standards is important to prevent fraud.  Management must demonstrate this model by providing a tone at the top emphasis on this culture.  After setting the tone, management must follow up on this commitment by hiring the right people for the job and ensuring that their hiring policies are effective at eliminating those people that do not meet the standards set by the culture.  The hiring process should entail some form of background check in order to gather some information about their past ethical behavior.  After acceptance of new employees, management should clearly communicate their expectations and require written confirmation of a mutual understanding of these expectations. Read the rest of this entry »

Fraud Symptom Categories

1. Internal Control Problems - material weakness

The first thing to remember when looking at internal controls is the fraud triangle.  Without all three elements of opportunity, pressure and rationalization it is less likely that fraud will occur.  By creating controls that prevent these elements or detect them in a timely manner after occurance managers can effectively monitor compliance.

Specific internal control issues stem from the organizations structure.  Examples of symptoms of control deficiencies include a lack of the following: segregation of duties, independent verification, proper authorization, physical safeguards, overriding the system in place, and proper documentation. Read the rest of this entry »