Accounting is very vulnerable to errors and fraud. In fact, both are almost similar, but there is a small thing that distinguishes the two. Which error is done accidentally. Meanwhile, fraud in accounting is an event that is done intentionally carried out to benefit one party, either an individual, a company, or another institution. This scandal is unfair or violates the law which causes the other party to suffer losses. Therefore, you can use accounting software to facilitate your financial management.
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Factors of Fraud in Accounting
Fraud or cheating does not just happen. There are several factors that influence a person or a party to commit manipulation, including:
Perhaps “strike while the iron is hot” is the most suitable idiom for those who commit this when there is an opportunity. Opportunity is one of the factors that open up possibilities for fraud to occur. Lack of or weak internal control can be a space for opportunities to occur. This opportunity can come anytime, anywhere, and to anyone, regardless of their position in the company. Indeed this is why a company needs to monitor how its employees perform by using a human resource management system.
Person’s bad traits
A person’s view of life, morals, and character also affect the occurrence of fraud in the company. People who are greedy and selfish will look for loopholes and opportunities to commit scandal and criminal acts. They don’t even care that they are committing crimes, as long as they get the results they want.
Economic need is also a frequent factor that makes someone commit fraud. Urgent living needs and economic burdens often make people desperate to take shortcuts by committing fraud, even though they know that it is an illegal act and violates the law.
Weak law charges
People who intend to commit fraud sometimes underestimate the legal sanctions they may receive because the applicable laws are weak, not burdensome, and have no deterrent effect. If caught, the perpetrator may only be subject to private law, and need to pay the fine or return the money he took. This will greatly benefit the perpetrators of fraud who have high positions, because they may even be immune from the penalty.
Types of Fraud in Accounting
Broadly speaking, fraud is consist of two types, which are based on the perpetrators who commit fraud and based on the acts of scandal committed.
Based on the Fraudster
Employee fraud is manipulation or scandal done by the employee of the company. Therefore, the motivation of employee fraud is for personal benefits.
Meanwhile, fraud in accounting committed by management within the company is referred to as management fraud. In addition, This fraud is usually carried out on financial reports or transactions to deceive stakeholders.
Based on the Act of Fraud
The definition of assets misappropriation is an intentional misuse or even theft of company assets and property for personal use. Assets misappropriation is the easiest form of manipulation to detect because it is countable. Therefore, some examples of asset manipulation include embezzlement of cash, misuse of office facilities for personal purposes, and others.
Fraudulent of financial report
Manipulation against financial statements is a misrepresentation of data, neglect of sum, and also disclosures that are intentional to deceive users of the financial statements. Company management is the one who usually do this type of manipulation. Some examples of financial reports fraudulent are overstating assets and understating liabilities.
Fraudulent of statement
Manipulation against financial statements usually begins with false statements or fraudulent statements made by management, officers, or company executives to cover up the company’s real financial condition. Then this manipulation is happen by changing some financial information in the presentation of financial statements, with the aim of deceiving investors, banks, and taxes.
Unsurprisingly, corruption is also one type of scandal because it includes abuse of power, bribery, and economic extortion. Corruption is hard to detect because this scandal involves alliances with other parties.
The theft or sale of consumer data intentionally by individuals within the company to other parties is a form of scandal. The company should secure and properly keep their consumer personal data such as name, address, telephone number, financial data, and so on because they are confidential data. Sometimes the data is leaked, stolen, and even worse, sold to irresponsible parties. This will cause consumer data leakage and is possible to threaten the consumers themselves.
How to Prevent Fraud in Accounting
Promoting SOPs and anti-corruption
Every company has SOPs or Standard Operating Procedures that regulate the acts of fraud. Companies need to promote socialization regarding the contents of SOPs that regulate performance and anti-corruption activities for employees. Not only that, but companies also need to convey strict sanctions and penalties if their employee commit any scandals, regardless of who violates them.
As well as the sanctions must be firm and not just stop on the responsible dismissal, but also need to get into account for their actions. Hopefully, it will minimize or even eliminate the occurrence of fraud within the company.
Good financial analysis
Analyzing finances properly is one way to prevent any type of financial manipulation. Good and thorough financial analysis can minimize the occurrence and also as a form of anticipation and closing the opportunity for employees to commit fraud.
Using an integrated accounting system will generate financial reports automatically without the intervention of many parties and minimize human error. So the financial reports will be transparent, factual, and as is. An integrated accounting system will prevent opportunities for fraudulent financial statements.
HashMicro provides the Best Accounting Software for enterprises in Singapore to automate the preparation of your company’s financial statements. Moreover, monitor the actual and comprehensive financial condition of your business, manage budget management according to real data, reconcile all bank transactions, and create accurate financial reports in seconds with one integrated and secured system.