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how is account auditing done?

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PG1995

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Hi

Do you know how account auditing is done? I'm not talking about auditing of bank account because that would be complex. Some days ago someone was saying that auditing was being done in their company and auditors come every six months to do the auditing. That's not a big company as far as I know. Suppose, the company had renovation like paint, new furniture etc. The person who was responsible for this renovating task used some of the company's funds fraudulantly. I will explain how. Suppose, in the records it was shown that furniture was bought for $10,000 although in reality it only cost $5,000. Some of the money wa also paid to the furniture company so that they can substantiate the 'falsified' figure of $10,000. The same goes for other things such as funds spent on new paint. How would auditors know that there have been any irregularities in the funds? If they won't be able to trace the fraud, then what's the use of having them? Please edify me on this. Thank you.

Regards
PG
 
An Audit is no perfect.
For every bit of money that went out, there needs to be a receipt, and a item in the building, or a shipping order on items that have left the building.
I had a boss that got a kick back from a vendor. Because the money never entered the building (it went to his house) he never got cot.
I have seen items go on e-bay, and the new owner sends on the warranty card. The computer shows the item is in the warehouse. Heads roll!
 
There are virtually no services/products that don't have a general guideline for it's approximate cost, this is why auditors get paid decently, they audit all the time, it's their job, they know how much things cost, how much labor is, how much profit should be figured in, and they know when to raise a red flag about what's on the books and ask questions. Most of time when confronted about questionable book keeping people in the wrong will fold and confess rather than go through the rigors of being analyzed.

It is very seldom there is a 'sophisticated' criminal.
 
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Strange question. Things that make you wonder. Hmm.
 
Hi

Do you know how account auditing is done? I'm not talking about auditing of bank account because that would be complex.
Regards
PG

And you think auditing a company is less complex. Why?

Rules for auditing vary by country.

John
 
I have a friend who is a CPA and auditor, we actually had this conversation fairly recently. I wondered how often he actually ran into something dubious. Not very often but on occasion there will be outright fraud. For example a country club was audited and the head chef was selling stuff off the loading dock. The company knew about it but really didn't care because they liked his cooking. :p
 
how is account auditing done?

That's easy. My wife sits down and looks at my credit card statements and working by line items she just keeps repeating what's this, over and over again. :)

On a more serious note, my wife manages a small public TV station. She is bonded and on a monthly basis signs checks for literally tens of thousands of US dollars. On a regular basis she works with their accountant reviewing the books and accounting for expenditures. If for example $100,000 was spent to procure new equipment, then the equipment is audited and accounted for. That equipment, like all equipment is then tracked for depreciation on a periodic basis. This is but one type of auditing to balance the books.

Ron
 
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