Page 337 - CA Final PARAM Digital Book.

QNO Embezzlement of Cash- Areas Old Course- (N07E, M09R, M12M,M16M, PM17, N17M, SM17, N18M SM21)
633.000 TITANIUM CNO – INTG.140 New Course-- (SM23)
In a company, it is suspected that there has been embezzlement in cash receipts. The company appoints

you as an investigator. What are the areas you would verify?
Answer ➢ Cash Receipts:-

• Showing a larger cash discount than actually allowed.
• Issuing a receipt to the payee for the full amount collected and entering only a part of the
amount on the counterfoil.
• Adjusting a fictitious credit in the account of a customer for the value of goods returned.
• Adjusting a cash sale as a credit sale and raising a debit in the account of the customer.
• Writing off a good debt as bad and irrecoverable to cover up the amount collected.
• Short debiting the customer’s account in the ledger with an intention to withdraw the
difference when the full amount payable.
• Under-casting the receipts side of the Cash Book.
• Over-casting the payment side Cash Book.

QNO Fraud (Supplier Ledger) Old Course- (N08E, M11E, N16M, PM17, N19E, SM21)
635.000 TITANIUM CNO – INTG.140 New Course-- (SM23)
Write a short note on Frauds through supplier ledger.
OR
In a Public Limited Company, it is suspected by the Management that there has been embezzlement in
supplier's ledger. As an auditor of the Company, you have been asked to investigate the matter. What
are the major areas that you would verify in this regard?
Answer ➢ Supplier Ledger: -
• Suppressing the Credit Notes issued by suppliers and withdrawing the corresponding

amounts not claimed by them.
• Accepting purchase invoices at prices considerably higher than their market prices and
collecting the excess amount, paid in cash, from the suppliers.
• Adjusting fictitious or duplicate invoices as purchases in the accounts of suppliers and
subsequently misappropriating the amounts when payments are made to the suppliers in
respect of these invoices.
• Withdrawing amounts unclaimed by suppliers, for one reason or another by showing that
the same have been paid to them.
• The auditor should verify the bought journal with reference to entries in the Goods
Inward Book and the suppliers’ invoices to confirm that amounts credited to the
accounts of suppliers were in respect of goods, which were duly received, and the
suppliers’ accounts had been credited correctly.
• The auditor should request all the suppliers to furnish statements of their accounts to
see whether or not any balance is outstanding or due so as to confirm that allowances
and rebates given by them have been correctly adjusted.

QNO Investigate Frauds of Inventory defalcation Old Course- (M19R, N19M N19E, SM21)
637.010 TITANIUM CNO – INTG.140 New Course-- (SM23)
Mr Sharma is reviewing the anti-fraud controls for a construction company. The company has witnessed
a few frauds in the past mainly in the nature of material stolen from the sites and fake expense
vouchers.

Mr. Sharma is evaluating options for verifying the process to reveal fraud and the corrective action to be
taken in such cases. As an expert, you are required to brief Mr. Sharma about the inventory fraud and
verification procedure with respect to defalcation of inventory?
Answer ➢ Inventory frauds- Inventory frauds are many and varied but here we are concerned with

misappropriation of goods and their concealment.

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