As Atul Bhiwapurkar CPA, I have first-hand experience of how alertness is vital in discovering fraud. With so many years of experience, I have tremendous insight into all the ways through which fraudulent maneuvers can appear in an organization or business. Whether it's a small company or a large corporation, fraud is always a sad reality, and at all times, it has to be addressed. For this purpose, here are some of the most common approaches that I use to detect fraud as a CPA.
- Red Flags Identification
The first step to identifying fraud is by looking out for the red flags. To be candid, some of the signs may be clear as day, but many are pretty subtle. Being a CPA Atul Bhiwapurkar, I always keep looking for inconsistencies in financial records, unexplained discrepancies in the cash flows, and missing or incomplete documents. Any sudden and drastic change in the lifestyle or behavior of the employee or any change in the financial habits can also be a red flag. In this case, if one party in the organization is living beyond their means without making anything reasonable out of it, then something fishy is probably going on.
Unusual transactions, high volumes of voided sales, journal entries that seem unusual, and inconsistencies between financial and inventory records are all clear red flags. As Atul Bhiwapurkar LinkedIn emphasizes, my job is to be thorough and question anything that doesn’t align with expectations, even if the explanation later seems reasonable.
- Analysis of Financial Statements
One of the key tools at my disposal as Atul Bhiwapurkar from Milpitas, California, is the company’s financial statements. Most of the anomalies or unusual patterns can be picked up on regular review and analysis. These should therefore be areas that I give special attention to, cash transactions, expense reports, or the pattern of revenue recognition.
Another critical method of review is through the comparison of financial statements both over the period and also against industry peers. The changes are not easily explained and sudden spikes do alarmingly suggest fraudulent activity. For instance, a sudden increase in revenues without corresponding rises in business activities may show fabricated sales.
- Internal Controls Review
Effective internal controls are considered one of the most important elements in preventing fraud. I periodically evaluate the company's internal control systems, and some of the processes used here are at times segregated duties, authorization of transactions, and access to financial systems.
Weak internal control can thus be the platform upon which the wrongdoer might exploit opportunities that would not have otherwise existed. For example, I can think of cases involving employees taking advantage of lax procedures or oversight. My job as a CPA is to help businesses strengthen their internal controls where no one person has unchecked control over financial processes.
- Data Analytics and Technology
Fraud detection in today's digital age is done through data analytics. I run large datasets in sophisticated accounting software packages and tools for anomalies. Tools like Benford's Law, by which fraudulent data manipulations can easily be detected, are very helpful. Moreover, I use software that automatically tracks transactions over time and catches any abnormal patterns they may create.
Technological features allow for real-time, meaning that fraud may be dealt with sooner before it gets too big. For example, through machine algorithms, learning patterns through previous fraud to predict where new cases may occur.
- Interviews and Audits
In addition, as a CPA, I tend to conduct interviews and audits on suspicious activities. Human interaction is sometimes the best way to detect fraud. As such, asking the right questions and carefully listening to responses is sometimes all one needs to look for inconsistencies or further scrutiny.
Audits also help immensely. Whether it is a complete audit or a focused examination of certain accounts, audits give one all the time to go deep into numbers, which may portray some problems less noticeable at first glance.
Protection Against Fraud - The CPA's Role
Spotting fraud is not a static process; one needs to be diligent, attentive to all minute details, and knowledgeable about every aspect of financial systems. As a CPA, I aim to safeguard my clients' future and reputation by keeping ahead of the fraudulent crowd. So, through the integration of experience, analytical skills, and technology, I can help to spot some fraudulent activities occurring within businesses that would undermine securing the available resources.
