Ethics in Accounting
Many corporations judge the health of their finances based solely on the bottom-line. However, as one article shows, there is more to a company’s financial health than the final net profit. According to Joseph T. Wells, in his article “control cash-register thievery: show your clients the importance of looking above the bottom-line,” fraud does not always show up on balance sheets.
In this article, Wells discusses the problems a particular client had when it was found that there were suspicious return receipts on certain products. This was definite trouble for the company, which was named Discount Department Stores (most likely and assumed name in order to protect the real company that underwent this problem).
The first tip came when the company’s internal auditor spotted sales for funds of exacting amounts — 3 and are dollars — $400 and so on. Knowing that refunds do not typically come in exact hybrid-dollar increments, the auditor worked with Wells, who headed up a fraud squad at the time. As Wells question the auditor, he learned that Discount’s methods of financial accounting involved checking net sales and confirming that amount in the bank, rather than performing a horizontal analysis of income statements to determine if refunds were increasing as compared to sales. Read more…