How would you carry out an investigation in case of a fraud in business?

If cash has been misappropriated, the investigator should note the following:

1. He should be familiar with the nature of business and of the fraud suspected.

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2. He should check the Cash Book thoroughly. In doing so, he should check the following steps:

(i) He should check up the balances and totals of the Cash Book carefully.

(ii) The balance of Cash Book should be well compared with those of the Bank Pass Book.

(iii) The counterfoils of Pay-in-Slip Book should be compared with the Schedules received from the Bank.

(iv) Cash sales should be checked by reference to the original contracts and documents.

(v) Items of expenditure should be verified.

(vi) Discount received or allowed should be vouched.

3. He should carefully examine the Purchases Book and Sales Book.

4. He should examine the Petty Cash Book.

After taking the steps stated above, he should submit the report to his client.

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