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Irregularities in the Accounts Receivable Area of a Firm

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What irregularities should a fraud examiner look for in the accounts receivable area of a firm?

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Solution Summary

The solution explains some red flags to look for for some of the more common receivable accounts fraud like lapping and slow-pays. This solution is 545 words with a reference cited.

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Accounts receivable is one of the most widely abused accounts when accounting fraud is concerned.

The biggest red flags for fraud in A/R are a lack of segregation of duties. In all areas of accounting fraud detection, a segregation of duties is the first area that should be analyzed. Duties within the A/R department need to be handled by separate persons, and preferably by separate departments. The person posting payments to A/R accounts should not be the same person who handles the actual payments (checks), and the person collecting in the A/R checks should not be the same person to write the bank deposit. Irregularities also include a lack of defined policy regarding writing off old A/R's, and unrestricted access by personnel to the A/R ledgers, where more than one or two specific people have control. The fraud examiner really needs ...

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