NCJ Number
64658
Journal
GOVERNMENT ACCOUNTANTS JOURNAL Volume: 27 Issue: 1 Dated: (SPRING 1978) Pages: 1-6
Date Published
1978
Length
6 pages
Annotation
THE DIRECTOR OF THE DEFENSE CONTRACT AUDIT AGENCY (DCAA) DISCUSSES THE AGENCY'S VIEW OF ITS RESPONSIBILITY FOR FRAUD DETECTION, WITH EMPHASIS ON THE IMPORTANCE OF EVALUATING INTERNAL CONTROLS.
Abstract
TYPES OF FRAUD INCLUDE MISAPPROPRIATION OF ASSETS, UNDERSTATEMENT OF LIABILITIES OR OVERSTATEMENT OF ASSETS, SIPHONING ASSETS THROUGH TRANSACTIONS WITH AFFILIATED COMPANIES, AND KICKBACKS OR OTHER IMPROPER TRANSACTIONS. COLLUSION AMONG OFFICERS, AMONG EMPLOYEES, OR WITH OUTSIDERS IS THE MOST COMMON WAY OF PERPETRATING OR COVERING UP FRAUD. DCAA IS MOST CONCERNED WITH INTERNAL CONTROLS RELATED TO COSTS OF MATERIALS AND SERVICES CHARGED TO THE GOVERNMENT. CONTROLS INVOLVE LABOR RECORDING, PURCHASING, RECEIVING, AND ACCOUNTING ENTRIES TO TRANSFER COSTS. MANAGEMENT SHOULD HAVE AN ADEQUATE ACCOUNTING SYSTEM AND APPROPRIATE INTERNAL ACCOUNTING CONTROLS ON ALL TRANSACTIONS. WHEN MANAGEMENT IS INVOLVED IN THE FRAUD, HOWEVER, THE AUDITOR MAY HAVE DIFFICULTY DETECTING IT. THE CONTRACT AUDIT MANUAL OUTLINES DCAA'S RESPONSIBILITY FOR DETECTING FRAUD. INTERNAL CONTROLS RELATED TO ELECTRONIC DATA PROCESSING INCLUDE CONTROLS OVER ACCESS TO EQUIPMENT AND DATA FILES, PROCEDURAL CONTROLS, DOCUMENTATION PROCEDURES, AND CONTROLS OVER INPUT, PROCESSING, AND OUTPUT. COMPUTER AUDIT SOFTWARE IS THE MOST IMPORTANT TOOL AVAILABLE FOR DETECTING COMPUTER FRAUD. DCAA AUDITORS USE TWO SUCH PACKAGES, AS WELL AS FLOWCHARTING, MAPPING, TEST DATA GENERATORS, TAGGING AND TRACING, INTEGRATED TEST FACILITY, AND SYSTEM REVIEW. SYSTEM REVIEW SHOULD DETECT AND REPORT UNSCHEDULED RUNS, SEPARATION OF DUTIES, AND PROGRAM VERIFICATION. SITUATIONS ENCOUNTERED BY CONTRACT AUDITORS INCLUDE IMPROPER LABOR DISTRIBUTION, OVERCHARGES FOR MATERIALS, FRAUD IN UNIT PRICING, OVERREIMBURSEMENT OF PROGRESS PAYMENTS, AND ALTERED TRAVEL EXPENSE DOCUMENTS. (CFW)