Accountants Can Unveil Fraudulent Transactions In Business
Business success and failure can easily be gauged - through the financial statements
. These accounting documents have to be prepared regularly, as much as possible - daily. The financial statements will reflect the performance of the business. Office staff or bookkeepers do the entries to the company's books of accounts. But it may be unknown to the proprietors that the books can have wrong entries, made deliberately or not. Whatever the case, when this happens, the financial condition of the company is not correctly presented.All financial records can be made straight and correct. The business only needs a good accountant to check on the records and the entries.
Many business establishments failed because of fraudulent transactions which were not uncovered immediately. Error after error is committed until it is too late for the firm to recover on the mounting losses. This should not be the case. Is anybody stealing from the company? This case is not new. With connivance with the bookkeeper and employees, the owner would not discover the fraud being committed by the staff.
This is the big reason why entrepreneurs have to hire trusted accountants. It does not need to be a permanent employee who comes to the office every day. The accountant can be a retainer who would come only for instantaneous checking of records and auditing of the financial statements.
What records would the accountant look into to check the correctness of the financial condition of the business? The financial statements that will reflect the condition of the company are the balance sheet, the income statement and the cash flow.
*Balance sheet - This will show the owner the different assets, liabilities and equity. The accountant will see to it that the total of all the assets should equal the sum of the liabilities and equity. The equity will indicate how much the business investment is worth.
*Income Statement - To some, this is the profit and loss summary. This may be the most important of the three, from the point of view of the owner. It tells how the business is earning and whatever profit there is will be reflected in the balance sheet as part of the equity and net worth of the establishment.
*Cash flow - This will indicate how much cash is available for use of the company. Again, this is reflected in the balance sheet.
The accountant will have to prepare the three constituents of the financial statement. If there is anything that is not balanced in any of the three, she can check the books and the entries. In doing this, she can pin point the discrepancy and ultimately discover fraudulent transactions, if any.
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