- The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
- In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
- Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Explain - Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
Nathan A. Van Cleave says
1. The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
Assertions are especially important to the legal profession. Just as management assertion dimensions are based on Occurrence, Existence, Timing, Completeness, Accuracy, Valuation, Rights, and Summarization/Presentation to justify the confidence of management’s statements so too must lawyers support their assertions with evidence around similar dimensions.
When the prosecution or defense presents the relative assertions for their cases there is expected supporting evidence to confirm or validate the claims being disputed. For cases in which significant property, assets or money hang in the balance (and especially criminal cases), the stakes for providing evidence like deeds, payments, receipts, dates, etc become critical.
Xiaozhou Yu says
Nathan, thanks for sharing the ideas related to legal field, that;s what i missed. I was focusing totally on business controls. And that’s a great idea connecting with management assertion for those dimensions. Assertions from lawyer can be important evidence of a fair judgement. And i think the cases you mentioned involved property, assets , payments etc, should also involve management assertions.
Nathan A. Van Cleave says
Thanks for your comments Xiaozhou. I was trying to think outside the box a bit with the example.
Nathan A. Van Cleave says
2. In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
I’m going to cheat a bit here and say that Completeness and Accuracy seems to be the most critical management assertion dimension(s). From a logic perspective, in order for the other dimensions to hold true, the completeness and accuracy of the information or data needs to be true. Otherwise, if the underlying data being captured is incorrect or incomplete, it can logically null and void the validity of the other dimensions.
Mengqiao Liu says
Hi Nathan,
I like your thought that you put all dimension all connected and affected with each other, then Completeness and Accuracy are especially important among Management Assertions. When Completeness and Accuracy become the prerequisites, the audit will need to know the information or data are true above all.
Nathan A. Van Cleave says
3. Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Explain
I, thankfully, have not been a victim of fraud, but have come close to a potential event. My wife runs an online business and one day, she received an odd email. This happened in the earlier days of e-commerce and there wasn’t the same education and awareness of phishing or fraud scams then that there is now.
This email seemed legitimate enough to pass for a bank that we used then and it asked to click on a link to update the password or something similar. I was about 1/1000 of second away from clicking the link, but I noticed the actual address the email was coming from didn’t seem legit. So I stopped, and emailed directly to this email and had and unbelievable interaction, similar to a lot of the YouTube videos one might see now, the person on the other end of the the keyboard was extremely persistent and increasingly threatening in trying to get information and money.
As mentioned, while it didn’t lead to fraud, thankfully, it did open my eyes to what potentially could have turned into a fraud event.
James T. Foggie says
Nathan,
Thanks for sharing… pretty scary “stuff”… and getting scarier each day! Fortunately, there is a lot of training and service announcements nowadays that help the public 1) quickly identify phishing attacks, and 2) keep sharp on your awareness skills. Maybe it because I am in this curriculum but there isn’t a day that goes by that I don’t practice some anti-hacking (breach) technique in my personal and professional life. Thanks for sharing.
Nathan A. Van Cleave says
James,
That’s a great point too. I know my company over the past three years has implemented a very wide and far reaching anti-phising awareness campaign. It included information, phishing exercises and the integration of tools for users to easily report potential phishing emails.
I agree, being in both an IT and audit fields I have a much higher awareness of potential threats and practice more discipline around digital and online activities.
Heiang Cheung says
This was actually really scary lately I’ve been getting phishing emails pretending to be from Apple. Luckily I’m a type of person who questions everything no matter what, So I googled it and apparently it’s been a lot going around.
Nauman Shah says
Well let me just tell you that if I had a penny for a every time I got an email from a “Nigerian Prince” I would be richer than the prince himself 🙂
Thanks to my IT education and training, I always do my due diligence before clicking on fishy emails like that. They key is to be aware of the different kinds of techniques people use in the cyber world for hacking and fraud. The more aware you are, the less likely you will be to fall into the trap.
Scott Radaszkiewicz says
Question #1: The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
Assertions are important for accountants, and likewise, just as important to auditors. An auditor’s job is review the financial information of an organization and make a determination of the validity of that information. It is the management of the organizations job to provide the financial documents to the auditors for review. Management makes certain assertions about the financial information that they are providing to the auditor. Auditors use these assertions as truthful statements in helping them to analyze the financial state of the information provided.
Scott Radaszkiewicz says
Question #2: In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
I believe that accuracy is the most important assertion that can be made. Above all else, one has to trust that the information being provided is accurate overall. One can attest to the classification of data, and ensure accounts are setup correctly to track finances, but without verifying the veracity of the information provided itself, then the other assertions are meaningless. I can assert that our documents are complete and readable, but if the numbers themselves are wrong, then the entire process is tainted.
Mahugnon B. Sohou says
Hi Scott
I will have to desagree. A t first I also thought that completeness was the most important but then I realized that completness without accuracy means nothing, so I started thinking further and also realized that accurate but incomplete information is as useless as well.. Therefore completeness, accuracy, occurence etc.. are all equality important
Scott Radaszkiewicz says
Mahugnon, I agree, they do go hand in hand, and are all part of the bigger picture, that’s why there are all involved in the process. I was just locked in on having to choose one of them, not a few. I had the same conversation in my head when I was working on this question. It’s almost like completeness is “not accurate” too.
Scott Radaszkiewicz says
Question #3: Have you ever: Been victim of Fraud? Had evidence of, suspicions of fraud occurring? Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable? Explain
I was the victim of credit card fraud once. It was several years ago, 15 or more. I received my credit card statement in the mail and had 7 charges on there not mine. They were for the same exact amount, at the same store. It wasn’t me. I called about the fraudulent charges and was sent to the fraud prevention department. Now mind you, this is 15 years ago. Well before the dawn of the Instant Internet age, when you would get text fraud alerts for every purchase you made, like it is today. So, after explaining the situation, and the person telling me that this was obviously fraud, I was informed that this would take 3-4 months to investigate and clear up. I was also told to make the minimum payment on the account, so that I would not be charged any other fees. Yes, they wanted me to make a minimum payment on something that wasn’t even mine. After several phone calls, and many managers later, they at least told me I didn’t have to pay the minimum charges. Thankfully, 3 months later, the charges were removed and it was all cleared up.
Flash forward from that time 14 years later, to last May. I was in San Francisco on vacation and charged my dinner. My phone alerted instantly with a text message that a fraudulent charge might be taking place on my credit card. And if it was me, reply with 1, if not reply with 0. What a difference a decade and a half makes!
And I have been fortunate with fraud at work. I have never found any case of it, nor been asked to take part in anything fraudulent.
Xiaozhou Yu says
It must be hard to solve the fraud happened that long time ago, when internet and technology was not that powerful. As you said, the process was pretty inefficient, months spent for investigation even though it was clearly a fraud. And nowadays, yes procedures and technologies are much stronger, this is not only effective protection for customers but also for company themselves.
Scott Radaszkiewicz says
Question #4: Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
Let’s assume the Procure to Pay Process is: Requisition/PO Creation > Invoice > Validate Receipt > Payment. First and foremost, a key element to help prohibit any type of fraud or theft is segregation of duties. Without segregation of duties along this line, than fraud can happen at anytime. If the same person writing the PO is making the payment, then the ability for a person to commit fraud, and easily cover it up dramatic. Assuming that duties are segregated and that there are adequate controls in place to prevent fraud, the likelihood of your risk to fraud will be low. But there are still ways for fraud to occur. In all the steps, I think the greatest potential for fraud occurs at the payment step. The person ultimately releasing funds from the organization to another party has a lot of responsibility and power. There are many things that can happen along the process, including items being returned, orders cancelled, etc. Any mistakes up to the end can allow the person paying the bills to take advantage of others mistakes.
Xiaozhou Yu says
I like the way you illustrate the P2P process, quite simple and straightforward.
Without effective SOD, it will be hard to detect fraud, and find direct responsible person when fraud is detected.
And the payment process, i totally agree. No matter that’s an in or out payment, second and third party must involve, for example, the customer and the bank. It will be easy to have fraud when controls are hard to enact.
James T. Foggie says
Scott,
I wholeheartedly agree… segregation of duties is so very important in numerous areas of the financial landscape, as well as in the areas of IT that support the financial processes of an org. In several areas of an ERP portal (HR, expense vouchering; tuition reimbursement; PO processing…), segregation of duties is vital. Although I do not know for fact, I suspect one of the leading reasons for my company’s motivation to first implement an ERP system was to mitigate corporate credit card fraud. Immediately after the implementation of the ERP, all purchases had to be processed immediately through the ERP. Although not all use of the card required pre-approval, ALL uses were logged and monitored.
Folake Stella Alabede says
3. Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Explain
I have never been a victim of fraud, I could be extra careful, I don’t open emails I don’t know, I don’t click on mails that say – “you have won $1,000, click here to redeem your price”. I am not spontaneous, and I like to think things through many times over.
Also, I remember receiving a call in on Aug 17, 2016 (during the tax fraud period) from a guy named Terry Wilson with IRN number 7075619, ( I remember this because I was sitting at my desk at work and I write a lot, so I was jotting down as “Terry” was talking to me) that I was owing the IRS $9,000 and if I didn’t pay, the police would come arrest me the next day; I told the guy on the phone that I have always paid an accountant to do my taxes, and I have been doing that for many years, and I have been using the same accountant, so what error did the accountant make ?? and Terry said he didn’t know, I had the option to hire a criminal lawyer … 5 year jail time ….. (it was a lot of crap).
The only other option was to pay up now. I actually laughed, I said “you want me to pay $9,000 right now? and Terry said, if you pay any amount you have now, the IRS would cancel the rest, that do I have $1000 to pay right now ?? i can give him the card number and he’ll take the card details, and here was where I just dropped the call, Because i try never to give my card information over the phone to anyone.
so I turned around to tell my colleague what happened, and that’s when everyone in the office started talking about the IRS scam going on, one of my colleagues said that his brother’s wife actually paid $5,000 when they called her because she was scared to get deported as her immigration papers were not in order.
Akiyah Baugh says
Hi Stella,
Thank you for sharing. I have heard of scams like this going on, but have been fortunate enough to not fall victim to one. It is sad to hear that your colleague’s sister-in-law was taken advantage of and lost a large sum of money. I recently caught the tail-end of a news report where a man lost millions of dollars investing in a fraudulent gold scam. I believe an employee of a gold farming company in another country was given access to the gold in order to let outsiders, mostly Americans, see, test, touch the gold in order to get them hooked and want to buy into the opportunity. Fraudulent websites were set up in order for a person/victim to track their packages that were never actually sent. The packages would be shown as being on their way, but stuck in Customs and money would be required to get the package out of customs, etc.. It was a very elaborate scam.
Heiang Cheung says
Yeah, I used to get those emails all the time but now it all goes to my junk mail. I like how emails, for the most part, can automatically notice spam. Also, my old manager had a similar call about him owing money to the IRS and it was kind of funny because he actually recorded the conversation with the person. As soon as he said they were a fraud the apparent IRS person hung up the phone.
James T. Foggie says
1.The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
One of the definitions of ‘assertions’ rendered in our week 2 lecture notes is: “a confident and forceful statement of fact or belief.” In addition to accountants assertions are important to auditors as well because assertions are used to test internal control systems within the company/business unit being audited. Auditors use assertions to review against standards and guideline to ultimately product their audit assessments on controls. From a business standpoint, assertions are important to investors because financial statements are vital to the determination of the worth of company’s stock. Assertions provide a level of confidence in the financial statements that support the reported value of a company’s stock.
Nathan A. Van Cleave says
James,
Thanks emphasizing the importance of confident and forceful statements of fact or belief when it comes to company valuation. It is definitely something I didn’t realize, but certainly, true as potentially, millions of dollars of stock valuation are highly dependent on the confidence of those financial statements.
Additionally, great connecting assertions to the the audit work. It makes complete sense that auditors would have assertions to test, assess, and provide an opinion of the effective of internal controls.
James T. Foggie says
2.In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
Tough questions, but very thought-provoking! One can make an argument for deeming any of management assertion dimensions as “most important” simply because the absence of any of the dimensions listed within each of the three classifications (‘transaction-level’, ‘account balance’, and ‘presentation and disclosure’) of management assertions could provide an avenue for fraud. But, if I am pressed to provide just one dimension as the most important, I select completeness. Completeness within both the ‘transaction-level’, and ‘account balance’ assertions is vital because it shows the auditor a level of commitment to detail and accuracy in procedures. By providing an auditor complete information, the auditor is then able to begin his/her in-depth testing against a good set of data (i.e. financial statements).
Of course in a real-world situations, as a manager, I would strive to provide assertions that meet the criteria of all dimensions.
Scott Radaszkiewicz says
James, I grappled with this question for a while. I was focused in on picking just one of the assertions. But they are all vital. Correctness and completeness are so very vital. If either one are wrong, then it really does impact the entire process. It’s almost like you can’t choose. I did, I chose the other side, correctnes..
Scott Radaszkiewicz says
James, I grappled with this question for a while. I was focused in on picking just one of the assertions. But they are all vital. Correctness and completeness are so very vital. If either one are wrong, then it really does impact the entire process. It’s almost like you can’t choose. I did, I chose the other side, correctness..
James T. Foggie says
3.Have you ever:
– Been victim of Fraud?
Yes, my bank check card was hacked. Although I cannot prove it, I suspect the breach occurred at a rest stop gas station on the New Jersey Turnpike. This breach was a violation that made me alter the way I use bank cards. For the most part, I no longer use bank cards for daily transactions. I now use American Express and simply pay off the balance monthly. This new personal procedure gives me peace of mind because (1) AMEX protects you in the event fraud does occur; and (2) if attacked, the criminals are not attacking the accounts that contains my savings. I must say, my bank did have thorough controls that quickly identified a breach on my account. The criminals were able to rack up approximately $400 in fraudulent purchases (2 states away); however, due to the controls the bank was able to deactivate the card before the criminal attempted a $1,000 purchase! I was able to work with the fraud department to have the 4 fraudulent purchases removed from my account, and the funds restored.
———————————————————-
– Had evidence of, suspicions of fraud occurring?
Many years ago, as a favor, I volunteered at a sporting event in Philadelphia. I was asked to work in one of the ticket booths. Although the event was VERY popular, the planning of the event was not the greatest. Let’s just say, there was lots of money being handled at the “gate” without proper controls. I quickly established my own procedures within my ticket booth, and informed the person I was reporting to what my process would be. He was glad that I quickly developed a process and he cascaded the process to the other ticket “agents”.
Well… due to the lack of controls at the start, I quickly noticed that one of the main members of the organization (of the event) was pocketing cash funds in a very unsophisticated manner. He simply collected ticket money before the fans reached the ticket booth and ushered the fan(s) to the arena’s entrance. The event was “general admission”-only so there were no assigned seats. The individual who was performing the theft was 2nd in command, and a long-time friend of the event organizer (i.e. person who was 1st in command). I wish I could report that I was a heroic “whistle-blower”, however… I WAS NOT. At the time, I remember thinking… 1) I have control over my own personal morality, and 2) it is up to the organization to come up with tighter control processes for dealing with funds. I know, I know…not the most courageous approach to the situations :). However, at the end of the day, I did make the statement to the person I reported to that “in the future, he and the other organizers need protect their events from theft at the gate!”. I suspect the individual who I witnessed committing the act of theft, probably had been committing fraudulent offenses against this organization for some time… he looked VERY comfortable in his actions!!!
—————————————————
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Just recently I encountered a situation with the treasurer of a 501c3 non-profit organization I am affiliated with. Although the situation I am going describe is not related to an employer; and I wasn’t feeling intense pressure to act immorally; it was a situation that required me to respond morally. I often perform community service activities for the 501c3 foundation. Recently, the foundation needed a member to head up a supply/backpack school drive in August. I was authorized to spend $1,500.00 to purchase back-to-school items for young students of Camden, NJ. Acquisitions of any funds from the foundation’s account must be formally requested via a ‘Request for Funds’ (RFF) voucher. The voucher must be signed by the requestor, and authorized by the foundation’s president and treasurer. Also, proof of spending (receipts/invoices) must be submitted to the treasurer as part of the ‘checks-and-balances’ procedures established by the foundation many years ago.
Due to my many years of thorough adherence to the aforementioned process & procedures, the treasurer of the foundation has developed an high level of trust in me. The Camden community event was a SUCCESS. Our foundation was well received by the community after donating 50 filled schoolbags to students and 6 additional boxes of school supplies. After the event, the president and treasurer were very pleased with the overall success of our foundation’s involvement in such a worthy event. At that time, I informed the treasurer that I would submit all receipts from the purchases that evening. The treasurer replied: “I trust you, there is no need to submit the receipts!”. At that time, the treasurer had no idea that
the foundation actually had a balance from the allotted $1,500.00 dollars… there was a $188.32 leftover balance. This situation immediately reminded me of internal control systems. The foundation has controls in place to prohibit fraud. The requirement of submitting receipts and invoices forces the treasurer to keep all requestors of funds “honest and accurate”. By giving me (or any member of the foundation) a “pass” on submitting proper proof of spending, the treasurer is opening the door for fraud… he is also relying on the moral judgement of individuals to do the right thing!
So, how did this story end? I sent the treasurer (cc’ing the president) all receipts later in the day. I provided a synopsis the spending, and informed him of the leftover balance. I submitted the $188.32 balance back to the treasurer, and sleep well knowing that I have and will always do the “right thing”. Lastly, I embrace internal control procedures because they in essence, forces members of organizations to act properly when it comes to funds and finances.
Xiaozhou Yu says
Thanks for sharing your story, non-profit organization is always a “good place” for fraud, morally. Since there is no direct financial benefits, employers tend to be negligent on detecting fraud, employees can easily get money into their own pocket. The way you react of submitting all receipts was a great practice to avoid possibility of fraud and build a strong awareness of preventing fraud for the organization. Thanks for your efforts!
James T. Foggie says
Xiaozhou,
At the regional level, the non-profit org that I mentioned in my post discovered fraud 10 years ago to the tune of approximately $100k. Even though the amount of money I deal with is much smaller… the acceptance of relaxed controls is the gateway to more significant fraud amounts. Thanks for your feedback.
James T. Foggie says
4.Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
I would say steps relating to invoice processing are most vulnerable to theft/fraud. Without key controls within the accounting area of invoice processing, an avenue for fraudulent activities will exist. Imagine this, if an individual is allowed to enter, verify, approve and pay purchase orders, can you see where fraud could occur. The lack of separation of duties not only allows for fraud, it could actually tempt employees to participate in fraudulent activities. In weak environments described above, sometimes there are “knowing”, and “unknowing” participants in fraudulent activities. Tight controls along with separation of duties often mitigates the possibility of fraud in this area.
Robert Conard says
Well put James,
You are right that the separation of duties here are a must to maintaining integrity of the procure to pay process. There is a point to be made about the aware and unaware participants seeing a weak control environment as a precursor to fraudulent cases like this. Fortunately I think these processes are very widely separated, between entering, verifying, approving, and paying the invoices.
Tamekia P. says
1. The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
The concept of Assertions is important to the stakeholders of the organizations. As illustrated in the notes, “the existence of controls imply the existence of assertions and assertions require the existence of controls.” These assertions are important because the C suite relies on these financial statement assertions demonstrated by the controls to sign off on the 302 certification. This certification is management’s attestation about the completeness and accuracy of the information presented.
Tamekia P. says
2. In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
I believe that completeness and accuracy are the two most important management assertion dimensions. These dimensions reflect that the information presented includes everything they are aware of to date and that transactions have been recorded appropriately.
Scott Radaszkiewicz says
Tamekia, I agree. Of all of the assertions, they are the two most important. They almost complement each other. Can’t have one, without the other. Incomplete, to me, means not accurate.
Tamekia P. says
3. Have you ever: – Been victim of Fraud? – Had evidence of, suspicions of fraud occurring? – Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable? Explain
I have been a victim of credit card fraud. Several times a person unknown to me used my credit card to make random purchases from a sports store in a small city. Luckily, the purchases were small and I was quickly refunded by my card company. I did have to go through the inconvenience of reporting the card stolen and having to relearn my credit card number.
Tamekia P. says
4. Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
The part of the Procure to Pay process that is seen as the most vulnerable is Payment Processing. It is important to make sure that cash going out the door is a valid transaction and not a payment made by an employee to themselves or friends/family. A fraudulent purchase order could potentially not got paid but a payment processed is typically hard to recover after it has left the organization.
Folake Stella Alabede says
3. Have you ever:
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Explain
There was a time I was a technical business development officer for an IT company, we were partners with CISCO, HP and some other big tech companies, and what we do is like a middle man between the big companies and the smaller companies. We listen to the smaller companies, look at their network etc, determine what they need, advise them, and then on their behalf we would buy from CISCO etc at a discount for the smaller companies.
My supervisor handed off some accounts to me when i joined the Coy, he took me round to those company and introduced me to them. Sometimes later, one “Coy A” wanted to buy some Routers, Switches and several computers, and after I prepared the purchase order, the IT guy at Coy A told me to add $100 to this item, add $200 to that item and etc. I must have looked stunned because he told me – “your supervisor should have told you, that’s how we always do it, ask him, he also gets a cut of it”. So of course, I ask my supervisor and he told me to add the several hundred dollars. (Coy A was now paying extra for the Switches, Routers etc, a PO that should have for example $1,000 now had $1,500; So we had 2 P.O’s, one for Coy A that says $1500, and another P.O for my own company that says $1,000, so after Coy A pays my company, my supervisor gets the extra $500 from the accountant at my company and gives this back to the IT guy at Coy A, who then gives my supervisor a cut of it).
So, the accountant knew, and inevitably someone from “higher up” in my company must know as the accountant cant just be giving cash back from an order payment without some form of approval.
And from that point I started looking for another job because I knew I didn’t want to work in such an environment with such lack of moral values at every turn. I lasted all of 2 months at the company
Xiaozhou Yu says
1. The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
The concept of “Assertions” is also important for all auditing professionals, investors and executives.
It is important for auditors to make accurate assertions and important for investor and executives to understand such assertions.
Auditors uses audit assertions and procedures to perform tests on organizations’ policies, guidelines, internal controls as well as financial reporting process. Investors refer financial statement assertions to value company’s financial conditions and make proper investments. Executive refer management assertions to make proper decisions.
Source: https://corporatefinanceinstitute.com/resources/knowledge/accounting/audit-assertions/
James T. Foggie says
Very complete answer. When I first read the question, I immediately thought of investors… assertions are important to investors because when deciding to invest, people, companies etc. want to be confident in their decision. They want to be confident in the financial statements presented before them. So I agree, investors are surely very interested in assertions. Also, as you stated, auditors want to have clear, concise assertions to design their testing accordingly. Great post.
Xiaozhou Yu says
2. In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
There are many dimensions for management assertions. I think the most important one is accuracy. With other dimensions set, if the accuracy is not set well, other dimensions of assertion will not be valid and reliable. And all following decisions made according to the assertion may not be effective.
Xiaozhou Yu says
3. Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Explain
Yes, I guess this is a common one for everyone. The credit cards fraud. One of my credit cards have the statement with couple weird transactions, some of them are made in a totally different city, some are made in philly but definitely not mine. They appeared in same time period, and hard for the credit card provider verify if they are all fraud transactions. But I got refund on them all anyway.
There was one time, I went to the theater for a new movie, that was not the poplar one as another popular movie was shown at the same time, but when I got the ticket, the name of the movie shown on it was the popular one, time and location were for the one I really want. Clearly, there was fraud on the actual sales on the popular movie.
For the pressure of committing a fraud, I don’t have such experience, but I’m interested in other’s story.
Nathan A. Van Cleave says
Xiaozhou,
Your story reminded me that I indeed have had a similar fraud event happen to me. It involved a very weird charge on one of my credit cards. The charge was made in Denver, Co which is obviously odd as I live in teh Philadelphia area.
Luckily I reported it and was resolved without issue, but to this day, I still don’t know how or where the threat actors got a hold of my credit card number. Thanks for sharing.
Xiaozhou Yu says
4. Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
There are couple subprocess mentioned in the AGAS, all of those are facing certain risks. I think the invoice processing/payment is the most vulnerable.
This process involves most direct financial matters and will result in direct loss when the controls are failed. For example, payments to vendors, refund to customers, record on orders amount.
Theses involve external actions with other organizations and outgoing payments, that makes controls less effective.
Heiang Cheung says
I agree with what you said because I used to work in account payables and I used to have the same privilege as the accounting manager. I was able to create new vendors. I could just imagine if I was that type of person what I could’ve done.
Folake Stella Alabede says
4. Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
I think all steps of the procurement process is vulnerable in one way or the other, the level of vulnerability is way higher in some than the others, and it’s a bit hard to pin point which step of the process is more vulnerable depending on the variables involved..
I think most of the vulnerabilities/fraud or failure, irrespective of whatever step it is in the procurement process, if duties are not properly segregated, or controls are not put in place (e.g. – to monitor access revocation in the case of a user transfer from one department to another), then one person can initiate and probably complete all or most part of a fictitious procurement transaction.
Additionally, looking at the vendor/sourcing steps to the payment steps, to avoid vulnerable to theft, fraud or failure of some kind, the proper inquiries and legwork/homework/due diligence must have been done, to ensure that:
1. You are actually buying from a vendor that would deliver what is needed according to required specification
2. The quality of the order is high and is not some cheap or low quality
3. The order would arrive timely (imagine a 7-day order that arrives after 30 days)
4. Are you overpaying or even being ripped off, for the order placed? etc.
If these due diligence are not performed, the procure to pay process can be vulnerable to fraud or failure of some kind at any step of the process.
Mengqiao Liu says
1. The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
‘Assertions’ is important to attorneys. I watched a South Korean film called ‘The Attorney’ last month. The film tells after a friend’s son is abducted and tortured, the tax attorney becomes the defense lawyer for a group of young men in a case against the government. The background was inspired by the real-life “Burim case” of 1981, this group of young men was arrested without warrants on fabricated charges that they were North Korea sympathizers. Besides the political issue, there was a lot of scenes of this tax attorney and the plaintiff lawyer to debate the offense exist or not. There was a branch of ‘assertions’ by both sides of the lawyers to approve they were on the right side and make the other side lawyer nullifying his testimony. These ‘assertions’ were proved by the pieces of evidence they collected, the ‘assertions’ can persuade the judge to decide whether the group of young men are guilty. The tax attorney (as the defense lawyer) kept finding the evidence and witnesses to prove they are innocent. This is not just about business, the tax attorney was defending with the government and tried to protect this group of young men’s lives.
Here is the Wikipedia of this film- https://en.wikipedia.org/wiki/The_Attorney
Mengqiao Liu says
2. In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
I believe that ‘accuracy’ is the most important dimension of Management Assertions. Accuracy is the baseline and the beginning of a management assertion. Auditors rely upon a variety of assertions from the reports, data, and evidence to audit a company. Attorneys rely upon a variety of assertions from evidence and witnesses to win a lawsuit. Without accuracy, nobody can convince the others whether the evidence are reliable and authentic. Back to management assertion, accuracy is the correct amounts of transactions with recording. Without accuracy, the audit would have inefficiency and inadequate report, which would influent the business or the organization.
Mengqiao Liu says
3. Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Explain
This happened in last semester. Several of my classmates and I received an email from a professor at Fox school in the morning, I don’t remember the exact content in that email, it probably said click a link to change our username and password. One of my friends met this professor at noon and asked about the email, and the professor was surprised because he didn’t send anything to us. Then, he found his email was hacked. Fortunately, I did not click the link. None of the friends of mine clicked the link, so I didn’t know if the link carries with the virus or not. Other than that, I have not been a victim of fraud.
Heiang Cheung says
I agree with what you said because I used to work in account payables and I used to have the same privilege as the accounting manager. I was able to create new vendors. I could just imagine if I was that type of person what I could’ve done.
Heiang Cheung says
That’s actually really scary because if I would’ve gotten an email from my professor I probably would’ve clicked on whatever they sent because who would think the professor email got hacked. This is really good to know because now I’ll think twice before clicking anything a professor sends.
Thanks
Mengqiao Liu says
4. Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
I think payment processing is the most vulnerable to theft or fraud. Firstly, the fraudulent includes a variety of tricks of payment fraud, such as credit card fraud and cheque fraud, which need to pay more attention to it and use methods to avoid or mitigate the fraud. Secondly, the payment processing a monetary transaction, which will cause criminals to commit crimes. Lastly, the consequence of a payment theft or fraud will lead to money lost, indemnity or any other property lost.
Mahugnon B. Sohou says
Hi Liu
You are right. I think the first thing that most people think of when they are asked that question is the payment processing, because that directly involves money, and any chance someone has at getting money fast they will do it.
Heiang Cheung says
1. The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
The concept of Assertions is important to any profession like doctors, lawyer and auditors in my opinion. Occurrence, completeness, accuracy, rights and summarization is needed to be an auditor or a lawyer. If completeness is not there than the information won’t be presented accurately to the court as a lawyer and information won’t be present to the audit committee.
Heiang Cheung says
2. In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
I would have to say accuracy would have to be the most important because if the information is inaccurate than the rest doesn’t really matter. If the work is completed it could be done but could be wrong.
Heiang Cheung says
3. Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
I’ve been a victim of credit card fraud and was notified by the credit card company because it was a large purchase. There was also a time when there was other purchase from out of state that been decline.
I’ve also worked at a supermarket and one time I was scanning damaged items out of inventory and was told to not scan out the damaged items because it would mess up the shrink number for the quarter.
Heiang Cheung says
4. Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
I would have to say the payment process would be the most vulnerable to theft and fraud because its where monetary transactions are made. If a company don’t have the right controls in place account payable could be paying any vendor, they want. Also that’s where invoices are pass through and approved. Depending if how a company system is set up it might allow a certain amount of differences from the PO price and the invoice price. Someone could continue to pay the percentage of difference to the vendor so he could get kickbacks.
Folake Stella Alabede says
1. The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
According to the Oxford Dictionaries, the definition of Assertion is ‘a confident and forceful statement of fact or belief’
The concept of ‘Assertions’ is important to accountants as well as to Auditors. This is because Audit assertions make up an important element in the different stages of financial statement audits. An auditor uses audit assertions and procedures to perform tests on a company’s policies, guidelines or internal controls, and financial reporting processes.
Financial statement assertions are also important to investors, since nearly every financial metric used to evaluate a company’s stock is computed using figures from the company’s financial statements. If the figures are inaccurate, that would obviously result in misleading financial metrics, such as the price-to-book ratio (P/B) or earnings per share (EPS), which both analysts and investors commonly use to evaluate stocks.
https://corporatefinanceinstitute.com/resources/knowledge/accounting/audit-assertions/
https://www.investopedia.com/articles/financial-analysis/063016/what-are-financial-statement-assertions.asp
Mahugnon B. Sohou says
The concept of “Assertions” is also important for anyone in the auditing or legal profession. Assertions are used by auditors to perform tests on policies, procedures and reporting processes. It Occurrence, Completeness, Accuracy is needed to prove that the supporting evidence for cases can be trusted. They help in investments and decision making.
Mahugnon B. Sohou says
The concept of “Assertions” is also important for anyone in the auditing or legal profession. Assertions are used by auditors to perform tests on policies, procedures and reporting processes. for lawyers, Occurrence, Completeness, Accuracy is needed to prove that the supporting evidence for cases can be trusted. Assertions also help in investments and decision making.
Mahugnon B. Sohou says
2. In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
For me I believe all dimensions are important. For instance if we take just completeness and accuracy we realize that the information provided has to be complete before it can be considered valid. The information also has to be accurate, otherwise it wouldn’t matter that the information is complete of not because the information would be erroneous. A document can be complete but if the information contained are wrong or filled with errors, then the entire process is based on errors and can’t move forward. So overall I would argue all the dimensions are equally as important, because the absence of any of the dimensions could lead to worng doing or fraud.
Derrick A. Gyamfi says
Casid,
Thanks for sharing! As you said I do believe as auditors, the entirety of all assertions is important because all of them as a collective helps in gaining reasonable assurance over the financial statements, data, or information we are auditing. Despite this, I also think some assertions such as the existence of assets and the completeness of liabilities might be of slightly more importance because these are areas of higher risk.
Mahugnon B. Sohou says
Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Explain
I have been a victim of fraud once. in summer 2017 I had to move from my dorm here at temple because school was over. I accidentally forgot to pack my play station 3 console (with my debit card information saved on it for purchases purposes) and I only realized it after I was already back in New York with my family. I called the dorm few days later and they told me that all the rooms were emptied and already occupied by a new tenant. I couldn’t find my console. Few days later I then got a purchase confirmation email and I realized that who ever had my console was using it to purchase games using my playstation account that was saved on it, with my debit card info. I then proceeded to delete my account online and removed all my info from the account online. I escaped from a catastrophe, because it could have been worst. It was already done, but at least I prevented any other transactions from my account from being processed.
Mahugnon B. Sohou says
4. Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
I think the most vulnerable step would be the invoice processing. If there are no tight control this could lead to fraud. For instance, someone cannot on his own verify, approve and pay purchase orders because he could make a request for payment to himself and approve the payment himself, whci would be a fraud. Therefore separation of duties is important to have in this scenario because it makes sure one person is not in charge of the entire process.
Akiyah Baugh says
The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
The concept of “Assertions” are important to management. Management use assertions to explain certain aspects of the company to the public. Then it is the job of the organization to ensure that the assertions that management made hold true. These assertions should be an accurate representation of a company’s assets and liabilities. Auditors then use the assertions made by management when conducting an audit of the financial statement in order to obtain evidence as to whether management’s assertions hold true and can be supported.
Akiyah Baugh says
In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
I believe Completeness is the most important management assertion. I was on the fence between accuracy and completeness, in the end, I chose completeness because if a financial statement is incomplete it cannot be accurate. Management implicitly asserts that all transactions are included on the financial statement, therefore if the financial statement is missing any transactions the company would be open to liabilities.
Akiyah Baugh says
Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Explain
– Yes, I have been a victim of credit card fraud on multiple occasions. I believe one act of fraud occurred when I paid a bill using my debit card at a doctor’s office. However, I do not have any proof that this is what actually occurred. In a 4 month time span, I had to have my bank card canceled and have a new one reissued three times because of fraudulent charges, maybe someone at the financial institution was responsible for the fraud? I have an alert set up on my account that sends me a summary of every transaction that occurs via text. I have always been very cautious when it comes to any providing any personal information that could lead to fraud and/or identity theft.
– I do not currently have any suspicions of fraud of occurring, however, I conduct my day-to-day transactions as carefully as possible as if fraud is always lurking in the shadows ( I am not as paranoid as I sound :)) For example, I do not provide credit card information over the phone and I do not provide my social security # when filling out paperwork at a new doctor’s office.
-Fortunately, I have never been pressured by an employer, or anyone else if my memory serves me correctly, to commit an act that was either morally or legally questionable.
Akiyah Baugh says
Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
I believe the payment process of the Procure to Pay process is the most vulnerable to fraud. Having weak controls in place leave a company open to fraud such as false discounts, overpayments, or false invoicing. An organization should have strict control over who has access to the accounting systems and implement separation of duties in order to ensure that one person cannot create an order and pay the invoice.
Pascal Allison says
Great placement Akiyah Baugh. The functionalities of creating an order and paying the invoice. This is a good reasoning for the separation duties so as to avoid the risk of fictitious invoices and payment. and implore checks and balances.
Nauman Shah says
The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
It is the Accountant’s responsibility to log financial transactions in the form of journal entries. So the concept of Assertions, which is the completeness and accuracy, Existence, Rights and Obligations, presentation and disclosure are important to accountants, since it’s their responsibility to record information in a manner that’s consistent with these assertions. Similarly, this concept is equally important to all users of financial information, e.g. credit providers and stockholders. Both of parties put their trust in the Accounting and Audit professionals to ensure that Financial statements are accurate and the assets stated actually exist and the company has the right to use them.
Nauman Shah says
In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
I am going to answer this question different and say that they are all important, because failure to record transactions in accordance with any given assertion can lead to fraud and misleading information. While it is important to record the accurate amounts of an expense, if it’s not recorded in the correct accouting period, the revenue for that period can be inflated. Similary if inventory is not valued at the lower figure of either cost or net realizable value, net assets can be inflated.
Nauman Shah says
Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Answer: Thankfully I have never been a victim of fraud, but I have been victim of several fraud attempts, including phishing, Trojan horse etc.. Being a Risk professional by training, I always do my due dilligence before I make any business transaction. I never click on a suspicious or an email with a.exe attachment as I know that’s an exectubile file that would most likely load a malicous software on my computer.
Nauman Shah says
Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
The most important step is the segrgation of duties or other manual controls such as the manual component of a 3 match, which includes reonciling the goods received with the PO and invoice. In the absence of an SOD for PO creation and approval, a person could create and approve payment on fake purchase orders. If there is no compensating control such as making payments to an authorized vendor only, this person could be just finding his/her bank account.
Folake Stella Alabede says
2. In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
Again, the order of importance might be relative as these dimensions are somehow like a deck of cards, if one is wrong, then the others might somehow be imbalanced.
But I would still take a look at Accuracy and Completeness. Accuracy is the assertion that all information disclosed is in the correct amounts, that the full amounts of all transactions were recorded. Testing accuracy addresses whether transactions are free from error. Its more like Garbage in – Garbage out, if accurate data is not fed into the system to begin with, then you can be sure that the output even if complete- is inaccurate; thereby making the other assertion dimension wrongly generated/calculated
Derrick A. Gyamfi says
With respect to accounting the concept of assertions is as follows:
Assertions are the implicit or explicit claims and representations made by the management responsible for the preparation of financial statements regarding the appropriateness of the various elements of financial statements and disclosures. Assertions are also known as Management Assertions and Financial Statement Assertions.
An accountant uses audit assertions and procedures to perform tests on a company’s policies, guidelines or internal controls, and financial reporting processes. In financial statements, assertions about the recognition, measurement, presentation, and disclosure of financial information are included.
With this explanation in mind, aside accountants, the concept of assertions is important to any job function related to the compliance of laws, regulations, policies, and guidelines. Although the scale of this varies per job (i.e Accountants/ Lawyers vs Police Officers) the general concept of assertion still exists among them.
Derrick A. Gyamfi says
Management assertions are claims made by members of management regarding certain aspects of a business. As auditors, test the validity of these assertions by conducting a number of audit tests.
The 5 assertions of management are
• Existence or occurrence
• Completeness
• Rights and obligations
• Valuation or Allocation
• Presentation and disclosure
Each line in the financial statements contains all assertions. However, the risk of misstatement for each assertion will vary according to the type of account. The auditor is more concerned about the higher risk assertions.
• Existence is a concern when auditing assets.
• Completeness is a concern when auditing liabilities.
• Occurrence is a concern when auditing sales.
• Completeness is a concern when auditing expenses.
Hence, the most important of management’s assertions will be Existence of Assets, Completeness of Liabilities, Occurrence of Sales, and Completeness of Expenses.
Derrick A. Gyamfi says
I have been a victim of credit card fraud before. This happened earlier this year as I was checking my mobile banking app and noticed a purchase from ASOS US (a clothing website that I usually shop at) for over $200. This particular time specifically I knew I had not ordered anything from the website and was wondering how this could be possible. I visited the website to check my cart and order history to find nothing there. After this realization, I contacted the company and they did not have any trace of the charge and asked for a copy of my statement to issue a refund. I also contacted my bank who refunded the lost amount to me.
Robert Conard says
Question 1
Highly common among auditors, assertions are the feedback given by accountants based on tests they’ve performed within a company’s controls, financial statements, and policy guidelines. Assertions offer its users insights into the level of accuracy and compliance discovered by these tests.
The notion of assertions is important across many professionals. Assertions are a way of expressing expertise in a field and giving a professional opinion on a situation. Lawyers often use assertions to take logical steps towards settling a case.
Robert Conard says
Question 2
All management assertions are important in delivering information to auditors. The 5 assertions are:
(1) Existence/occurence
(2) Completeness
(3) Rights and obligations
(4) Valuation/allocation
(5) Presentation and disclosure
Although only marginally more important, I think completeness should be priority in financial and operational disclosure. Failure to comply with completeness or existence principles both work inversely to mislead statement users. However, my feelings that completeness should take precedent stems from the idea that if not reported, auditors may not know to look for that incomplete item. In existence, the accounts and items are laid out but may be inflated. This issue is at least verifiable whereas completeness can go under the radar without being detected.
Robert Conard says
Question 3
I am fortunate enough to have never been a victim of fraud, been reasonably suspicious of fraud, or have reason to act fraudulent myself. I maintain my awareness of such an issue.
At my organization during undergrad, I was the VP of Finance for a year. In this role it dealt with treasury duties and maintaining accuracy. The role demanded additional responsibility wherein the financier and eboard would perform an audit of the previous administrations reporting. Based on the evidence overturned at the transition phase, there was adequate evidence to support reasonable material accuracy.
Robert Conard says
Question 4
Because the procure to pay process is in such proximity to company finances, it is possible to perform fraudulent transactions. A vulnerability could be the lack of controls around what vendors are paid and how the company goes about confirming that evidence.
Highly common incidents of theft during the procure to pay process include inception of fake vendors. The accounts payable department then begins paying a vendor that acts as a medium for fraud.
Pascal Allison says
1. The concept of ‘Assertions’ is important to accountants. Who else is it important to?
Why?
An assertion is important in most field if not all. I will relate the assertion to my field of studies-auditing. An assertion is important to an accountant as it is to an auditor. The auditor must review all claims (implicit and explicit) and representation made by management regarding the appropriateness of all variables of a financial statement and disclosure. The importance of assertion to auditors is the fact that the auditor relies on assertion regarding the subject under review for decision making or execution of their duties.
2. In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
In my opinion, all dimensions are important. Occurrence, completeness, accuracy, cut-off, and classification must be present for a fair judgement. Yet, if I must choose one, I will highlight accuracy. If you have no information, you can clear statement the report is base on lack of information. If you incomplete but accuracy information, you can make some assumption. With complete, but inaccurate information, the outcome will be incorrect.
3. Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Explain
I have been pressured to commit an act that was morally or legally questionable. I served as a loan/credit analyst at a financial institution where my boss asked me to sign a facility over my limit that the customer did not meet the requirement.
I refused on grounds that my career would be jeopardized. I never made any case as my boss asked/instructed me off records. I asked for some documentation to back my action from him, and he refused. Then, I presented the filed after reviewing the customer account which said, “denied.”
After which, I did not get recommendation for promotion, and I got resigned to a smaller unit, but I am glad I stood my grounds.
4. Which portion/step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
Segregation of duties is big in the Procure to Pay process. If you have one person creating, posting, and paying invoice and paying is a perfect recipe for fictitious customers, invoices, and payment. The risk cane avoided by separating the duties or functionalities.