Accounting fraud

how does government detect accounting fraud like manipulation of financial statements , not recording sales in book of account ??
Replies (5)
Quick Summary
This discussion explores how governments identify accounting fraud, such as manipulating financial statements or failing to record sales. Methods mentioned include predictive scores like Z-score and M-score, as well as government portal tools that employ red flagging based on parameters like e-way bills and circular trading. The conversation also touches upon the potential limitations of these red flags, considering audit thresholds and the scale of potential fraud.

I never did that, there is are two measures called as Z-score which predicts bankruptcy and M-score which interprets fraud

That should be detected by Government as per Recommendation given by CA&G appointed by Government
Govt Portal has tools like red flagging on various parameters, enforcement wing,dept also from time to time take criteria like e-way bills of new registered dealer,non filers, circular trading, related parties transactions to keep check

That is possibly true. I bet the red flags could be wrong as per my knowledge cause audit threshold gives margin for 3% error. Consider an accountant cheating 3 lakhs from 5 crores revenue, how will the red flag. I am assumptions only and not sure if threshold limits are applicable in India.

***assuming and sry for typo error

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