CIMA BA3 Syllabus B. RECORDING ACCOUNTING TRANSACTIONS - Fraud - Notes ^{13 / 35}

What is Fraud?

Fraud is difficult to detect, and it is normally committed by people inside the organisation, for example, management and employees. 

Therefore, an organisation must have a strong control environment as this will ensure that fraud is less likely to occur.

The Control Environment

This consists of internal controls that are essential to preventing fraud. 

Internal controls are the policies and procedures used by directors and management to help in:

• Achieving organisation's objectives

• Preventing and detecting fraud and error

• Ensuring accuracy and completeness of accounting records

• Ensuring timely preparation of reliable financial information

Detecting Errors

Even if an accounting system is automated and computerised, it cannot be entirely free of errors. 

Some of these errors may be found by chance or same may never be found at all. 

Some of the checks that can help to detect errors are:

1. Spot Checks

2. Comparison with external evidence

3. Reconciliations

4. Carrying out an audit