Guidance on how to detect fraudulent, fake and adjustment entries made by pvt ltd companies to cook books

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Abhishek Kumar Gupta (Querist)
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05 February 2016 kindly share your experiences as to how pvt ltd companies cook their books which are difficult to detect. pls help..

Ganeshbabu K

Ganeshbabu K (Expert)
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06 February 2016 1)To perform this test, after gaining an understanding of the company's controls and procedures, the auditor will make a selection from the company's journal entries.

2)Auditors typically select entries that are large, made by upper management, posted late in the accounting period or otherwise of interest. Once the selections have been made, the auditor will ask for supporting documentation that validates each entry.

Ganeshbabu K

Ganeshbabu K (Expert)
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06 February 2016 1)checking purchase transactions which are not supported by security gate check inward and material inspection report.---in those cases enquire further and find out whether material received or not...you may find fake entries/bills here

2)Extract journal entries relating to the prior year that were made just immediately following a fiscal year-end.Enquire the journal entry till payment(whether it is genuine or not)

3)Knw about persons competent to authorize transactions and limit of authorization.Find out entries which is not authorized or which is authorized by preparer of the entry.Extract general entries which is approved by person who have very less authorization limit and check whether multiple entries of below such limits entered in books,
It is good process to make entry passed through different levels, like, persons who enter transaction and authorization and payment authorization should be given to different persons to avoid fradualent transactions to some extent.

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