Ten Ways Of Manipulating Accounting Statements And Auditing Strategies

This article will introduce several common manipulation methods of accounting statements and their audit strategies, for your reference.

Mode of operation: private enterprises under natural names often hold various companies under the control of natural persons. However, natural persons do not have the responsibility to merge statements. Some consolidated statements are "poor and rich", only choose companies that combine profits, while hiding part of the loss and insolvent companies. Or only merge some enterprises' profit statement, do not merge their balance sheets, etc., so that the so-called consolidated statements are displayed well.

Audit countermeasures: first, we must pay attention to the scope of merger of corporate statements.

In accordance with the requirements of the enterprise accounting standards, except for the company's financial statements, if a Target Corp has a subsidiary company or a company that can exert control on it, unless the company is in liquidation, bankruptcy or beyond control, all subsidiary companies should be incorporated into the scope of merger when compiling consolidated financial statements, and they should not be selectively merged from the perspective of hidden losses.

"Big move" -- pfer cash flow subjects

Mode of operation: cash flow and tax are two major subjects for enterprises to do more difficult and are also the focus of due diligence.

The income of enterprises is easy to increase, but the cash flow table is more difficult to manipulate at the beginning and end of the year.

"Net cash flow from operating activities" is a more important assessment index, because it reflects the solvency of enterprises through normal operation. Therefore, some enterprises will obviously belong to "financing" or "investing".

Transfer to the cash flow of business activities and increase the cash flow of business activities.

Audit countermeasures: (1) the cash inflow of business activities should be equal to the number of business receipts and receivables in the current period - the increase in accounts receivable + the increase in the number of accounts receivable - the decrease in the number of accounts receivable.

If not, ask why.

(2) pay attention to "other cash inflows related to business activities", which are generally non operating income and should not be too large.

If the amount is too large, it should be asked about its composition to determine whether it is pferred from the investment and financing inflow.

"Accounts outside the account" - private "small Treasuries" or loan

Mode of operation: the state strictly prohibits the accounting of accounts, but there are always a number of enterprises using various ways, such as virtual cost, to collect funds and set up separate accounts to record illegal economic activities.

The main methods are: extra cash account and bank deposit account, that is, "small Treasuries" account; accounts outside assets account, that is, "small warehouse" account; off balance sheet debt, that is, private lending funds, and then pfer through shareholder loan form; extra account costs, rights and interests, profit accounts and so on.

Audit countermeasures: through the analysis of the relationship between the subjects of the accounts and the analysis of the current account, we find the clues of the actual controller and the financial personnel interview, and combine with the business risk of the enterprise, the control environment of the enterprise, and the sincerity degree of the management.

Mode of operation: to increase the income of the enterprise through receivables, and to evade tax by means of a receipt instead of an invoice.

Audit countermeasures: for enterprises to manipulate this way, the tax return can be obtained by extracting the bank's water slip of the main account of a company's monthly income and expenditure, and calculating the proportional relationship between tax rate and income.

Especially for real estate enterprises, we can verify the authenticity of verifying rate through Internet check.

"Disguised financing" -- promotion through after-sale, rent and other means

Mode of operation: in the real estate shop sales, through the promise of the next few years of annual income, to achieve the purpose of financing in disguise.

In order to circumvent the restrictions of relevant laws and regulations, the item company usually sign the contract for selling houses, and sign a commissioned business contract by the associated Property Management Company. In this contract, the annual rental return is promised to achieve the purpose of fast sales, so that the amount of the early payment is large, but it actually causes the future repayment obligation of the enterprise level to become heavier, which constitutes the overall liability of the enterprise level, and it also has the repayment obligation in the repayment period.

The risk of investment after sale is very great. In the long charter period, there is no guarantee for owners' rentals.

Some developers will pfer assets after receiving the purchase money, resulting in shops being difficult to operate normally, buyers can not receive rents normally, and even some projects illegally collect funds through after-sale charter.

According to the eleventh provision of the "management measures for the sale of commercial housing", the real estate development enterprises shall not sell the commodity houses by the way of returning the sale or selling the goods in disguised form, and the real estate development enterprises shall not sell the uncompleted commercial housing after the after-sale charter or the disguised after sale charter.

Potential risks: first, there may be fraud, developers in the development of commercial housing as collateral to obtain bank loans at the same time, the sale of the project to the buyers, and some even escape with money; two, developers financing or disguised financing, the funds diverted to other items, once a part of the project operation problems, will lead to capital chain breakage; three, after the completion of the project, poor management, can not achieve the expected level of income, no cash flow payment.

Audit strategy: after sale rent is a form of sales promotion. Under its own compliance, it can not affect auditors' judgment of asset prices.

(1) understand the existence of the above information through telephone interviews and inquiries on the Internet by visiting the sales department.

(2) if there is, look around the price of the real estate, understand the real price and assets value after the elimination of the false part of the after-sale rent.

"Swollen face and fat" -- inflated assets through appraisal and other means

Mode of operation: including directly increasing the cost of land and increasing the value of assets by evaluating value-added, increasing the proportion of its own capital investment through the way of incremental investment, while exaggerating the amount of its assets.

Audit countermeasures: (1) land acquisition, land paction confirmation, pfer contract, land tax payment voucher and corresponding tax and tax payment voucher. The sum of the total sum should be consistent with the amount of the account.

To compare the reasonableness of land valuation value with reference to the paction price of similar land volume and usage.

(2) a project schedule of the three party (the contractor, the owner and the supervisor) under the project master contract is obtained by the signature of the project, and whether the corresponding inventory items are settled according to the construction contract, and the accounts payable are confirmed according to the difference between the settlement project progress and the outstanding payment.

(3) image progress: verify the current investment ratio relationship between the total input of the feasibility study report and the corresponding period number, whether it is in line with the project's image progress, and verify whether the schedule of the project is consistent with the actual progress schedule of the site.

Obtain the latest three party's progress confirmation sheet, check with the paid engineering bill, verify whether the unpaid part is included in the payable works, and verify whether the payment amount of the large amount of the project payment is consistent with the amount currently charged to the inventory.

"Left-handed right-handed" -- pfer funds through related enterprise pactions

Mode of operation: for the real estate trusts established after the establishment, the contractor of the enterprise may be the associated party or long-term friendly partner of the enterprise. When the approval is made, the funds can be pferred through the construction side to pfer funds for the purpose of other purposes.

Audit strategy: to understand whether the construction side of the enterprise has superficial relationship and personal relationship behind it, so as to ensure the effective use of funds and no appropriation.

"Hiding dirt" -- large amounts of private lending in current accounts

Mode of operation: other accounts receivable and other payable accounts belong to assets and liabilities, which are often referred to as "trash cans" in the reports. Many false and difficult placement subjects are pferred to these two subjects. Some private illegal loans are also easy to get out of the present. The excessive amount of the two items should be very careful.

Of course, more often than not, they will not enter accounts, or only enter the natural shareholders' accounts, and natural shareholders will borrow the business again.

In addition, enterprises will use "other receivables" to falsify expenses. Some cost is not directly included in the current profits and losses, but as a "long-term receipts" for other receipts to increase profits.

In addition, enterprises directly charge receivables and accounts payable, and buyers and sellers benefit from each other, which has actually constituted an interest bearing loan.

Audit countermeasures: (1) get the details of two accounts of other receivables and other payables to see whether there are major and difficult subjects to explain, such as trade union funds, large sums of money to natural persons, etc., whether it is caused by private lending.

(2) whether or not other receivables and other receivables of a unit are not offset at the same time, thereby inflate liabilities.

(3) check the reasons for long term debts and track down the original vouchers to ensure their authenticity.

"Fake share real debt" -- private lending through capital accumulation

Mode of operation: in some private enterprises, the smaller capital stock and larger capital reserve in owners' rights and interests will generally be explained as shareholders' convenience for tax avoidance and capital reduction and capital accumulation, but some enterprises actually invest in private capital raising and joint construction.

But this is not only an enterprise's rights and interests, but rather a debt.

Audit countermeasures: (1) check shareholders' investment vouchers and bank receipts, and determine that the source of funds on the surface is invested by shareholders.

(2) through the comprehensive investigation with shareholders or management, and other channels, we can understand whether shareholders have the strength to invest in the above funds, and the source of capital and assets.

(3) if there is any doubt about the above investigation, a lawyer should be commissioned to investigate the local financing environment, the personal real assets of shareholders, whether private lending is filed in public security organs, etc.

"Confusion use" - cost method and equity method are used to increase profits and assets.

Mode of operation: some investment enterprises have a controlling interest on the invested units, but when they receive cash dividends from the invested units, they are accounted for by the cost method and pferred to the investment income, resulting in a virtual profit increase.

Audit countermeasures: according to the financial accounting system, the proportion of enterprises' foreign investment reaching more than 20% of the owners' rights and interests of the invested enterprises should be accounted by the equity method. When the dividends payable should be paid, the "long-term equity investment" subject should be reduced.

In order to complete the profit plan, some enterprises will directly increase their dividends to the investment income.

In this regard, CPAs should be reduced.

It should be said that the enterprises with several sets of accounts and several reports are more common, and the enterprises with trust financing often have the subjective motivation to manipulate the accounting statements.

The author suggests that, first of all, the auditor should start from the angle of the trustor's due diligence and responsibility to the company. In due diligence, he should take a cautious and skeptical attitude, analyze the authenticity of the financial statements of the counterparties and reflect the commerciality behind them. Through the interpretation of the financial statements, he truly understands the strength and asset status of the enterprises, and entrust the clients and the company well.

On the other hand, the background, operational ability, professional conduct and even personal character of a person in charge of a company are of great significance in judging project risks.

For more information, please pay attention to the world clothing shoes and hats and Internet cafes.