Audit Issues

Controls! One Key to Preventing Fraud (4 of 7)

The first step to prevent fraud is to ensure that controls are in place. These controls may be as simple as having background checks performed on people working with the financial department of the organization.

The following are some examples of preventative controls, but they are not all-inclusive.

* Creating a Culture of Honesty and High Ethics

Are You Ripe For Fraud? (3 of 7)

This is a 3rd part posting of understanding fraud and the implications on the organization. In part 1, we discussed that churches, just like any organization, is susceptible to fraud. In an April 23, 2001 article by Christianity Today headlined "Jury Convicts Greater Ministries of Fraud," five leaders were convicted in Federal Court on 72 counts of conspiracy, wire and mail fraud, and money laundering, in one of the largest church fraud schemes in American history.

Is your organization's environment ripe for fraud?

Is It Fraud? Characteristics You Should Look For! (2 of 7)

Understanding fraud and who may be susceptible to commiting fraud is a series of postings to help church and ministry leaders understand management's responsibility. In a 2001 magazine article, 5 ministry leaders were convicted on 72 counts relating to fraud. Fraud? In the Church? You bet. The Church is not isolated nor "exempt".

The Primary factor that distinguishes fraud from error is whether the underlying action that results in the misstatement of the financial statements is intentional or unintentional.

Some characteristics of fraud are:

"I Didn't Know!" Why is Fraud Rising in the Church? (1 of 7)

"My people are destroyed for lack of knowledge..." Hosea 4:6 - King James Version

The Church is the place of salvation, healing, deliverance, transformation and deployment of people into his/her giftedness. Many of the people that enter the church doors struggle in various areas of their lives. Some may struggle with stealing, embezzlement, unlawful desires, etc. Helping individuals overcome these issues and engaging them in ministry is one of the hardest challenges faced by local congregations.

Communicating Internal Control Matters – (2 of 2)

As a recap from Communicating Internal Control Matters post #1 of 2, the AICPA Statement on Auditing Standards (SAS) No. 112, Communicating Internal Control Related Matters Identified in an Audit - establishes new standards relating to the auditor's responsibility to communicate to an entity's management and to individuals charged with the entity's governance significant deficiencies and material weaknesses identified during the course of an audit of the entity's financial statements.

Communicating Internal Control Matters – (1 of 2)

For auditors of financial statements, the AICPA has issued a new auditing standard effective for periods ending on or after December 15, 2006.

AICPA Statement on Auditing Standards (SAS) No. 112, Communicating Internal Control Related Matters Identified in an Audit - establishes new standards relating to the auditor's responsibility to communicate to an entity's management and to individuals charged with the entity's governance significant deficiencies and material weaknesses identified during the course of an audit of the entity's financial statements.

What is the difference between a Compilation, Review, and Audit?

Many times board members, lenders, and ministers have made requests that their organization obtain financial statement services from CPA firms. The services most commonly requested are as follows:

Compilation – A compilation is the compiling of numbers creating financial statements. No attestation procedures procedures are performed. A compilation is limited to presenting in the form of financial statements information that is the representation of management. No opinion or any other form of assurance regarding the accuracy of the information is rendered.

Who is Committing Fraud?

According to the 2006 Association of Certified Fraud Examiners Report to the Nation,

64.1% of the cases were committed by employees and only 18.1% were performed by anonymous individuals. 37.7% of all fraud perpetrators have been with the organizations for over 10 years.

How is Fraud Detected?

Most fraud is detected by tips from others or by accident. Therefore organizations should take tips seriously. Organizations should consider the establishment of a Hotline for individuals to make anonymous tips to the risk of fraud, especially in light of the Sarbanes-Oxley legislature. This internal control has become an increasingly greater used resource to increase the tips of fraud for employees that have detailed knowledge of the organizations.

From the 2006 Association of Certified Fraud Examiners Report to the Nation