Accounting And Financial Decision Making
Most executives and business owners ascertain company health based purely on the financial end result. However, impropriety does not always reveal itself on the balance sheets. In an article by Joseph T. Wells in the Journal of Accountancy the problem of cash register theft is addressed and illustrates the effect on a company?s financial health.
In the article, an internal auditor was ask to investigate why on particular store had lost money for three consecutive years. The author, a fraud examiner, worked with the auditor to determine where the money was going and the method used to obtain it. The first clue was when refund slips were discovered that were for exact even amounts, which is not typical of refunds. It was found that the company?s accounting method of verifying net sales against bank deposits aid the culprit in the embezzlement of thousands of dollars in cash over the previous three years. If the company had at any time performed a horizontal analysis of income statements a red flag would have appeared because of increased refunds in comparison to sales.
A former manager, no longer with the company, was soon discovered to be the culprit. The former employee?s personal finances
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