Explain different types of frauds and what actions can be taken at the time of suspected frauds

Explain different types of frauds and what actions can be taken at the time of suspected frauds?

Financial fraud is deliberate financial deception which a fraudster initiates with the aim of personal gain. Most financial scams involve white collar criminals who almost always possess specialized knowhow and criminal intentions. Fraud involves many activities which are different and could range from a simple con theft to fraud involving cheques and identity theft to very complex rackets. Due to its nature and means of propagation, fraud can possibly assume many forms and the fraudsters imagination is seemingly the only limit there can be. The most common types of fraud include;

Identity/Banking fraud: This is where a fraudster acquires a victim’s banking details and uses them to access and steal from their bank accounts. It is advisable that one uses the security steps that most electronic banking institutions offer to avoid falling prey to such a scam. Institutions should also regularly update the details of their staff to prevent falling prey to theft from an outgoing member of staff.

Cheque fraud: This is where a fraudster issues cheques that eventually bounce due to funds in the issuing account(s) being insufficient. Individuals receiving cheques as a form of payment should insist on bankers cheques or decline to accept cheques altogether. Where customers insist on making payment through cheques, it is cautionary to await the clearance of the cheque before releasing any form of service or product to them.

Payments and Invoices fraud: This is a form of fraud that capitalises on a business’ flawed accounting system. The fraudsters will use this weakness to make payments for invoices for unordered or un-received services and goods. The fraudster can also make a payment to employees who are actually not existent or existing employees receiving excess payments. To avoid such scams, the invoices should be crosschecked against the products or services received and ensure that the payment process involves several people.

Direct theft: The fraud involves stock handling staff lifting items directly or the payments received being pocketed and the sale either not being recorded or getting deleted. The management should ensure that the importance of the process of checking the stock and the sales is understood by all.

Cash Collection Schedule

July August September October November Bad Debts

Cash Sales £ 6,500 £ 5,250 £ 7,400 A/C Sales July £ 2,000 £ 16,000 £ 1,400 £ 600

A/C Sales Aug £ 3,000 £ 24,000 £ 2,100 £ 900

A/C Sales Sept £ 4,000 £ 32,000 £ 2,800 £ 1,200

Cash Collection Schedule for September

September

Cash Sales £ 7,400.00

A/C Sales July £ 1,400.00

A/C Sales Aug £ 24,000.00

A/C Sales Sept £ 4,000.00

Total £ 36,800.00

Inventory Purchase schedule for September

Sept Purchases £5,000

Ac Payable £16,000

Total £21,000

Budget

Income Statement

Inflows Opening Balance £11,000

Cash Collections £36,800

Total Cash Inflows £47,800

Less Purchases £21,000

Gross Income £26,800

Outflows Administration expenses £9,000

Depreciation £4,000

Net Income £13,800

b. Cash Budget

Available Cash Net Income £13,800

Add Back Depreciation allowance £4,000

Total Available £17,800

Capital expenditure Equipment £18,000

Dividends £3,000

Financed By Bank Loan £8,200

Cash Balance £ 5,000.00