FRAUD AND FINANCIAL STATEMENTS FFRAUDULENT FINANCIAL REPORTING

DEFINITION OF FRAUD AND FINANCIAL STATEMENTS Fraudulent FINANCIAL REPORTING FRAUD ( cheating ) is an illegal act committed by one person or group of people intentionally or planned that causes a person or group benefit , and harm another person or group . While fraudulent FINANCIAL REPORTING ( fraudulent financial statements ) is a misstatement or omission is intentional disclosure of the amount and the purpose of deceiving the users report .Examples of Companies Type Doing FRAUD ( Cheating )Name of companyv FINANCIAL INSTITUTIONSv TELECOMMUNICATIONSv TRANSPORTATIONv UTILITIESv ENERGYExample Company Ever Perform FFRENRONSatyam

PT . CHEMICAL FARMA SCHEME The documents such as purchase invoices are often used to issue cash more than once for the same purchase . Often this happens because of policies that allow business entities paid by a copy of the purchase invoice without any original invoice .Often the transfer of funds or assets is done to disguise the presence of unauthorized expenditure .Expenditures from petty cash usually do not require authorization , then this raises the possibility of fraud .Commissions by the customer to the salesman or sales in return for granting a cheaper price is a thing that often happens in the world practiceIt is often the case in family firms which is often impaired company was not for business reasons but because of other reasons such as the family , the child's interest and so on .Often payment by check or deposits made ​​by customers is not included the name to whom the check or bank draft payable to company employees hasl bias accounted for as debt availed by the employee and the personal . In this case the employee may use corporate money without authorization .Not record revenue this would easily occur when part pencatatn concurrently with part or parts cash receipts and sales .Hide this sringkali billing accounts known by the term lapping accounting world . Where the bill today from customer A will be used first in private and later when it's time to charge customers entered or B then it is recognized as a customer billing and so on . The principle used here is the cover for the hole dug hole .Theft of materials or assets that have a high value will always be prone to theft . Another thing to note jugav specifically is the " SLOW MOVING GOODS " the stuff that has not been out of the barn .Misuse of credit card companies often work to ease the credit card companies have a credit card because the recording was received in the future , then this creates opportunities for fraud perpetrators to use it in self-interest .
 INDEX SURVEY FRAUD IN INDONESIAGovernment institutions :
     Procurement of Goods and Services
     Perijinana
     bribe
SIGNS - SIGNS FFR· Working capital is not enough· Rapid turnover in the financial position· Use of the supplier itself· Travel costs excessive· Transfer of funds between affiliated companies or divisions between· Substitution of external auditors· Cost consultant or free that belebihan· Lack or loss of assets· Decrease in performance· Control management is done by a handful or a few people· Someone who handles almost all important transactions· Difficulty billing accounts receivable· Completion of financial reporting late· Proof copy is used as the basis for payment of creditors· Senior management is very controlled or dominated· Revenue dropped drastically compared to the previous year· Conditions unfair business· A complex organizational structure· The level of labor turnover is steeper , especially in the financial position· The existence of errors - errors are not being corrected· Difficulty in obtaining audit evidence that frequent rejection or penggantin terhadapan internal examination SIGNS - SIGNS OF THE CHEATERS
 1 . financial pressures2 . Involved abuse or gambling3 . Telibat drugs - drugs or alcohol4 . Excessive or purchase expensive lifestyle5 . Complaints - excessive complaints against the management or company6 . Transaksasi against parties that are not independent7 . Increased stress8 . Internal pressure , including pressure to meet budget management9 . Excessive overtime and never took a leave of absence
 Role of Internal Auditors in Fraud Risks Facing Companies "1 . As we know that the activities of internal auditors are expected to contribute to the improvement of risk management entity , but should also be understood that not all entities have a risk management structure , if so , how the role of the internal auditor of the risk management process ?Risk management is the responsibility of management . To achieve the entity's objectives , management must ensure that the risk management process has been running and functioning properly . In this case , the internal auditors assist management through audit , review, evaluation , reporting and recommendation adequacy and effectiveness of risk management of the process . Management is responsible for the company's risk management and control . Meanwhile , the internal auditor who acts as a consultant to help identify , evaluate , implement risk management methodologies , and provide input for improvement of risk control systems .If a company does not have the structure of risk management , internal auditors provide insight to management on the need for risk management . If desired , internal audit can proactively provide assistance to management in the establishment of risk management structures . But need should also be understood that the proactive role different from the role as risk owners ( ownership of risks) .In other words , the internal auditor can facilitate the process of risk management , but do not have or be responsible to identify , take action to mitigate risks and monitor those risks . In the risk assessment (risk assessment ) , there are three important concepts that goal (goal ) , risk (risk ) , and control ( control ) . Goals are expected outcome can be produced by a process or activity . Risk is the possibility of the occurrence of an event / action that may prejudice or negative effect on the company's ability to achieve the objective entity , while the controls are elements that support the company's management and employees in achieving company goals .Internal auditors have a role in helping to ensure that management has done a satisfactory risk management company . In relation to the role of the internal auditor in identifying and evaluating the significant risks facing the company . For this purpose, the internal auditor should perform risk assessment (risk assessment ) the adequacy of the risk management process undertaken by management .Risk and Role of Internal AuditorsRisk is generally defined as an event / condition related to obstacles in achieving goals . Understanding the risks associated with " the purpose " , so if there are no goals set then there is no risk that must be faced .So , if the goal is to support the internal auditor pencapaiantujuan specified agencies , the internal auditor in the audit assignment must also consider all the risks that may be faced by the company in order to achieve its objectives . By recognizing this risk internal auditor will be able to provide feedback to the auditee so as to minimize the impact of risk auditee .Management must manage the company's activities in such a way as to ensure that the company's objectives will be achieved . Risk management is carried out by constructing internal control. In other words, internal control is a process for managing risk . Therefore , each auditor in the audit assignment should consider the risks that exist .Related to risk - the risk that may be contained in the company , including the assignment of internal auditors ,1 . identifying risks to be faced ,2 . measuring or determining the magnitude of these risks ,3 . find a way to confront and cope with risk ,4 . develop strategies to minimize and control risks include coordinating the implementation of the measures of risk reduction ,5 . and evaluate the risk management program that has been made .Thus , it can be said if the auditor has at least three roles in the fraud , among other things :a. Prevention of Fraud ( Fraud Prevention) ,b . Cheating detection ( Fraud Detection ) , andc . Penginvestigasian Fraud ( Fraud Investigation ) .In addition , in conducting the audit , the auditor will be faced with the possibility also presents financial statements or management accountability deliberately prepared incorrectly, for personal benefit various members of management or leadership or stakeholders in a company unit . With a variety of motives that lie behind them , for example to cover the massive embezzlement of the assets / wealth .What it is ( Risk ) Cheating ?To further the success of the role of auditors in the prevention and detection of fraud , should internal auditors need to understand fraud and other types of fraud that may occur in the company . G.Jack Bologna , Robert and Joseph T.Wells J.Lindquist define cheating " Fraud is criminal deception intended to financially benefit the Deceiver ( 1993, p 3 ) " is fraud is fraud criminals who intend to provide financial benefit to the fraudster . Here means any criminal act committed serious mistakes with malicious intent . And from the evil actions and he benefited financially harm the victim . Cheating usually involves three steps : (1 ) action / theact . , ( 2 ) Concealment / the concealment and ( 3 ) the conversion / conversion example the theft of property inventory is action , then the perpetrators will hide the fraud as proof of the transaction by creating a fictitious expenses .Furthermore, after the deed theft and concealment done , the offender will do the conversion by way of using their own or sell the stock . Basically there are two types of fraud , namely external and internal . External fraud is fraud committed by outsiders against a company / entity , such as customer fraud committed against businesses ; taxpayers against the government . Internal fraud is no legal action from employees , managers and executives of the company where he worked . In connection with the Association of Certified Fraud Examinations (ACFE-2000) , one of the associations in the USA which dedicate its activities in the prevention and eradication of fraud , cheating categorized into three groups as follows :a. Cheating Financial Statements ( Financial Statement Fraud )Financial Statement Fraud can be defined as fraud committed by management in the form of material misstatement Financial Statements adverse investors and creditors . This fraud can be financial or non-financial fraud .b . Misappropriation of assets ( Asset Misappropriation )Penyalahagunaan assets can be classified into ' Cheating Cash ' and ' Cheating on Inventories and Other Assets ' , as well as expenses fraudulently charged ( fraudulent disbursement ) .
c . Corruption ( Corruption )Corruption in the context of this discussion is corrupt according to the ACFE , instead of understanding by Law Combating corruption in Indonesia TPK . According to the ACFE , corruption is divided into a conflict of interest ( conflict of interest ) , bribery ( Bribery ) , granting illegal ( illegal gratuity ) , and extortion (economic extortion ) .Fraud preventionThe main role of the internal auditor in accordance with its function in the prevention kecuarangan is trying to eliminate or eliminating the causes of such fraud . Because the prevention of the occurrence of a fraudulent act will be easier than tackle when the fraud has occurred . Basically cheating often occurs in an entity if:a. Internal controls are weak or do not exist or do with loose and ineffective .b . Employees hired without thinking of their honesty and integrity .c . Employees governed , poorly exploited , abused or placed greater pressure to achieve financial goals and objectives that lead act of fraud .d . Fraud management model itself , not efsien and effective or not , and do not obey the laws and regulations ..e . Employee who is believed to have personal problems that can not be solved , usually financial problems , family health needs , excessive lifestyle .f . Industry in which the company is a part, has a history or tradition of cheating .Prevention of fraud in general is an activity carried out in terms of determining management policies , systems and procedures that help ensure that necessary actions are carried commissioners, management , and other personnelcompanies to be able to provide adequate confidence in achieving three (3 ) main objectives , namely: the reliability of financial reporting , effectiveness and efficiency of operations and compliance with applicable laws and regulations . ( COSO : 1992 ) .For this, the fraud that may occur should be avoided include the following ways :1 ) Establish good internal control structureWith the development of an enterprise , the management task to control the running of the company became increasingly heavy. So that those objectives can be reached top management , secure corporate assets and security operations can be carried out effectively and efficiently , management needs to hold a good internal control structure and effectively prevent fraud .2 ) Streamline the control activities( 1 ) Performance ReviewControl activities include a review of the actual performance versus budgets , forecasts , or the performance of the previous period , linking a series of different data or financial operations with each other , along with the analysis of the relationships and investigative and corrective actions , and review of functional or activity performance one branch credit manager for the report on the company's loan agreements and billing .( 2 ) Processing of informationVarious controls implemented to check the accuracy , completeness , and authorization of transactions . Two broad groupings of information systems control activities are common control (general controls ) and control application (application control ) .( 3 ) Physical controlsPhysical control activities include physical security of assets , the maintenance of the facilities are adequately protected from access to assets and records ; authorization for access to computer programs and data files , and periodic calculations and comparison with the amount specified in the control record .3 ) Improving corporate cultureImprove corporate culture can be done by implementing the principles of Good Corporate Governance ( GCG ) are interlinked with each other in order to push the performance of company resources to work efficiently , generate valuesustainable long -term economic for our shareholders and the communities as a whole .4 ) Making the internal audit functionAlthough internal auditors can not guarantee that fraud will not occur , but he must use his skills to carefully turn is expected to detect fraud and can provide suggestions to management bermafaat to prevent kecurangan.resiko facing companies such as Integrity risk , the risk of fraud by management or company employees , illegal acts , or other acts of deviance that can reduce the good name / reputation of the company in the corporate world , or may reduce the company's ability to survive . The existence of these risks requires the internal auditor to prepare precautions / prevention to deter fraud as described in the previous section .However , prevention is not sufficient , the internal auditor must understand also how to detect early occurrence of fraud arising . The detection measures can not be generalized to all fraud . Each type of fraud has its own characteristics , so as to be able to detect fraud should bear a good understanding of the types of fraud that may arise within the company .Fraud Risk Assessment ProceduresAuditor does not guarantee that all detected fraud , but must carry professional skills in planning , implementing and evaluating the results of audit procedures , so as to obtain reasonable assurance that errors , irregularities , and disobedience that material can be detected .Some auditing standards require auditors to detect fraud among other things contained in the Public Accountants Professional Standards ( SPAP ) and the Internal Audit Standards Oversight Government Apparatus ( SA - APIP ) .In line with the auditor's professional responsibility as well in order to meet the expectations of society , then in the planning and execution of the audit , the auditor should consider the risk of fraud .In connection with this, the auditor should take the following steps related to the risk of fraud.1 . Recognizing the possibility of fraud related to activity / substance problems / things to be audited .The move can be done with the following guidelines .a. Categorize activity / substance problems / things to be audited in accordance category assessment purposes .b . Formulate the possibility of fraud that may occur from any discussion within the specified category . The possibility of fraud that can be arranged as listed .2 . Define the controls that should exist , in order to ensure that the risk of fraud in the above will not happen .The move comes with the following guidelines .a. Controls should be prepared based on the risks identified in step number 1.b . On the identified fraud risks can be identified more than one control procedures that should be available .c . Vice versa , the control procedures that should have been there probably would effectively prevent more than one fraud risk .d . Basis used to assess the risk of fraud is a list of control procedures that should be available , not based on the risk of fraud that may occur . Assessment is based on whether or not the control procedures available , as well as effective or whether the control procedures .3 . Identify whether the controls that should be actually implemented or not implemented by the company .This step is done with the following guidelines .a. Assess whether the controls that should be actually applied or not . This assessment is based on observations or other means for the implementation of activities .b . This assessment should provide the answer " yes " or " no " for any identified control procedures , not the risk of fraud that may occur .c . The emphasis in this assessment is the effectiveness of control procedures , not on the availability of the draft control .4 . Determine the level of possibility (likelihood ) and impact ( Consequences) of the fraud , to assign risk rankings .This step is done with the following guidelines .a. Assessment of the risk level is done by giving score 1-5 with a score of 1 for the provision of minimum risk and maximum score of 5 for risk .b . Assessment of the level of risk should have the possibility to combine the level and impact of those risks .c . Determination of the risk ranking is done by aggregating all risk value of one category / sub category and then dividing by the number of grains of control procedures that should exist in order to obtain the average value of the risk category / sub category concerned . Category / sub category which received an average score shows that high risk category / sub category is prone to fraud risk .5 . Choosing the fraud risk to be understood better in audit activities .This step is done by paying attention to the calculation determining the ranking of risk resulting from step # 4 above .Guidelines that can be used , with regard to the risk of fraud , is that the audit should focus on the risk of fraud on the category / sub- category with a score of high risk ( eg, the average score value risk category / sub category > 3.5 ) .
knotIn conducting its business , the company continues to face a variety of risks which is called business risk ( risk bussiness ) . Including the risk of fraud (fraud ) were classified as at risk the integrity ( Integrity Risk ) . According to the ACFE , fraud can be classified into three categories of fraud , fraudulent financial statements ( Financial Statement Fraud ) , misappropriation of assets ( Asset Misappropriation ) , and corruption ( Corruption ) .However , prevention is not sufficient , the internal auditor must understand also how to detect early occurrence of fraud arising . The detection measures can not be generalized to all fraud . Each type of fraud has its own characteristics , so as to be able to detect fraud should bear a good understanding of the types of fraud that may arise within the company .After understanding the types of fraud , internal auditors need to understand exactly good internal control structure in order to make efforts to prevent and detect fraud . According to COSO , internal control structure consists of five components , namely : Environment Control ( Control Environment ) , Risk Assessment ( Risk Assessment ) , Controlling Standards ( ControlActivities ) , Information and Communication (Information And Communication) , and monitoring ( Monitoring ) .may be useful for my friend ......