Case 2.

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Fraud Audit Manual Fraud Symptoms

Fraud Symptoms
I. Accounting Anomalies
A. Irregularities in source documents
1. Missing documents
2. Stale items on bank reconciliations
3. Excessive voids or credits
4. Common names and addresses of payees or customers
5. Increased past due accounts
6. Increased reconciling items
7. Alterations on documents
8. Duplicate payments
9. Second endorsements on checks
10. Document sequences that do not make sense
11. Questionable handwriting on documents
12. Photocopied documents
B. Faulty Journal Entries
1. Journal entries without documentary support
2. Unexplained adjustments to receivables, payables, revenues , or expenses
3. Journal entries that do not balance
4. Journal entries made by individuals who would not normally make such entries
5. Journal entries made near the end of an accounting period
C. Inaccuracies in Ledgers
1. The total of all debit balances does not equal the total of all credit balances (Unbalanced Ledger)
2. Master (control) account balances that do not equal the sum of the individual customer or vendor balances
II. Internal Control Weaknesses
A. Lack of Segregation of duties
B. Lack of Physical Safeguards
C. Lack of Independent Checks
D. Lack of Proper Authorization
E. Lack of proper documents and records
F. Overriding of Existing Controls
G. Inadequate Accounting System
III. Analytical Anomalies
A. Unexplained inventory shortages or adjustments
B. Deviations from specifications
C. Increased scrap
D. Excess purchases
E. Too many debt or credit memos

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