Page 105 - Microsoft Word - 00 Prelims.docx
P. 105
Controls
Detecting errors
Some errors may come to light purely by chance, and some are never found at all.
For example, if you receive a cheque from a customer who has no outstanding
balance on his account, it is possible that an invoice has been omitted from the
books. If you never receive the cheque, the error might never come to light.
Spot checks are particularly useful in detecting fraud. For example, spot checks on
petty cash balances may uncover ‘teeming and lading’ activities, whereby an
employee borrows money from the petty cash on a regular basis, but puts it back
when the imprest is being checked, only to remove it again afterwards.
Spot checks are also commonly carried out on bank balances, ledger accounts and
inventories.
99
