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Irregularities in the Accounts Receivable Area of a Firm

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

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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 ...

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.