NCJ Number
68762
Journal
GAO Review Volume: 15 Issue: 2 Dated: (SPRING 1980) Pages: 44-49
Date Published
1980
Length
6 pages
Annotation
THIS ARTICLE DISCUSSES EFFECTIVENESS OF CASH-FLOW ANALYSIS IN DISCOVERING CASH GENERATION SCHEMES, OFTEN A FIRST STEP IN WHITE-COLLAR CRIME. A DETAILED EXAMPLE IS GIVEN.
Abstract
CASH-FLOW ANALYSIS EXAMINES FINANCIAL TRANSACTIONS WHICH INVOLVE DEBITS OR CREDITS TO CASH ACCOUNTS. THIS ANALYSIS CAN DETECT BRIBERY, EXTORTION, OR KICKBACK SCHEMES. MOST COMPANIES DO NOT KEEP LARGE CASH RESERVES ON HAND AND SCHEMES DISGUISED AS LEGITMATE TRANSACTIONS MUST BE DEVISED TO GET THE MONEY FOR ANY CRIMES. TO DETECT SOME CORRUPT ACT, ALL BANK STATEMENT, DEPOSIT SLIPS, AND CANCELLED CHECKS FOR A PREDETERMINED PERIOD ARE EXAMINED WITH AN EYE TOWARD UNUSUAL TRANSACTIONS (SUCH AS CHECKS MADE OUT TO CASH OR NONPAYROLL CHECKS ENDORSED BY HAND). ONCE THESE TRANSACTIONS ARE FLAGGED, THE AUDITOR MUST TRACE THE ENTRIES THROUGH THE MANY RECORDS USUALLY KEPT BY LARGE ORGANIZATIONS. KEEPERS OF THESE RECORDS OR JOURNALS SHOULD BE INTERVIEWED. AFTER THIS TRACKING, ANY TRANSACTIONS NOT SUPPORTED BY COMPANY BOOKS WILL BE APPARENT. SOME INDICATIONS OF FRAUDULENT ACTS ARE A SECOND OR SUPPLEMENTARY SET OF BOOKS, CONCEALED ASSETS, MISSING RECORDS, FALSE INVOICES OR BILLS, ETC. THE FINAL PHASE OF THE ANALYSIS IS IN-DEPTH INTERVIEWS WITH PARTIES INVOLVED IN THE UNUSUAL TRANSACTIONS. THE INTERVIEWER MUST PREPARE IN ADVANCE FOR THIS CONFRONTATION INTERVIEW. A DETAILED CASE STUDY IS PRESENTED WHICH FOLLOWS THE CASH-FLOW ANALYSIS PROCESS FROM BEGINNING TO END. (KHM)