We typically look for several indicators when investigating potential financial fraud within a company. First, unusual or unexplained financial transactions may hint at possible fraud. This can include large, round-figure transactions, payments to unfamiliar vendors, or discrepancies between invoice amounts and actual costs. Second, sudden, unexpected changes in financial performance may indicate fraudulent activities. Altered profit margins, spikes in revenue, or changes in key performance indicators can raise suspicions. Third, inconsistent, incomplete, or altered documentation may suggest attempts to conceal fraudulent activities. Lastly, we may look for signs of unethical behavior, such as a history of financial improprieties or excessive internal control overrides. Careful analysis of these factors helps us identify potential fraud and take appropriate action.
Take the role of a forensic accountant. Describe what signs you look for when investigating financial fraud within a company.