Question

1. According to Bologna and Lindquist, forensic accountants investigating employee crimes typically look for transactions that are odd as to what five characteristics?

Answer 1

According to Bologna and Lindquist, Forensic accounting is defined as "the application of financial skills, and an investigative mentality to unresolved issues,conducted within the context of rules of evidence.As an emerging discipline,it encompasses financial expertise,fraud knowledge, and a sound knowledge and understanding of business reality and the working of the legal system".

Forensic accountants while investigating employee crimes should look for the following categories of transactions.

(1) Skimming

Skimming includes theft of cash,generated usually from sales,prior to its entry into the accounting records.The person responsible for collection might pocket the cash and not enter the transactions into the accounting records or subsequently delete those records after being entered into the system.

(2) Lapping or Fraudulent write-offs

Lapping occurs when an employee steals cash by diverting a payment from one customer and then hides the amount by diverting cash from another customer to offset the receivable from the first customer .Lapping is most easily engaged when just one employee is involved in all cash handling and collection tasks.

(3) Use of a shell company

Abnormal state workers inside an association with power over payment may make shell organisations that they control.These shell organisations then bill the association for invented merchandise and administrations.The culprit more often than not is in a position to support charges or has power over workforce who favor installments in the interest of the association.As the installment is made to a shell organisation,theculprit has adequately stolen stores from the association.

(4) Ghost Employees

Use of ghost employees to divert money sham identities is one of the most common type of payroll frauds.A ghost employee is someone on the payroll who doesnot actually work for a victim company.

(5) Inventory Shrinkage

Inventory shrinkage is the excess amount of inventory listed in the accounting records,but which no longer exists in the actual inventory.Excessive shrinkage levels can indicate problems with inventory theft, damage, miscounting, incorrect units of measure ,evaporation or similar issues .

As employees can commit fraud by all  such means,a forensic accountant must be very keen and diligent to deal with such situations while investigating employee crimes.