Fraudulent Financial Auditing

Highly centralized organizations establish transfer prices in the event that goods or services are taken from one part of an organization and transferred to another. This is because they must have a record for each transfer. Without such record organizations would have inaccurate valuations of inventory. It could also create discrepancies or inaccuracies in department budgets. The records that are created for each and every transfer also provide management and opportunity to review and monitor department to department transfers.

2. Why do some consider market-based transfer prices optimal under many circumstances?

When managers are required to set transfer prices based upon current fair market pricing, they will be more likely to be economical

An example of an intrinsic reward would be the sense of pride and accomplishment that one might experience as a result of earning a good grade on a term paper. Extrinsic rewards are those that come from outside of an individual, in other words they are benefits offered by an outside force in exchange for desired performance.

9. What are common types of fraudulent financial reporting?

The two most common types of fraudulent financial reporting are: Recognizing projected sales as actual sales and recording them as such.

Failing to identify inventory that is worthless or considered obsolete and no longer suitable for resale.

10. How do internal auditors detect or deter financial fraud?

First, internal auditors deter financial fraud just by being there. Individuals are far less likely to attempt to commit fraud when they know that they are under a watchful eye. Second internal auditors place controls on business processes and perform routine tests to make sure that the controls are effective. Finally internal auditors perform in-depth special investigations when irregularities are found and they determine which individuals are creating irregularities. (Young, 2014)

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