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Accounting fraud[ edit ] In order to hide serious financial problems, some businesses have been known to use fraudulent bookkeeping to overstate sales and income, inflate the worth of the company’s assets, or state a profit when the company is operating at a loss. These tampered records are then used to seek investment in the company’s bond or security issues or to make fraudulent loan applications in a final attempt to obtain more money to delay the inevitable collapse of an unprofitable or mismanaged firm.
Examples of accounting frauds: Enron and WorldCom and Ocala Funding. These companies “cooked the books” in order to appear as though they had profits each quarter, when in fact they were deeply in debt. Demand draft fraud[ edit ] Demand draft DD fraud typically involves one or more corrupt bank employees. Since they are insiders, they know the coding and punching of a demand draft.
Such fraudulent demand drafts are usually drawn payable at a distant city without debiting an account. The draft is cashed at the payable branch. The fraud is discovered only when the bank’s head office does the branch-wise reconciliation, which normally take six months, by which time the money is gone. Remotely created check fraud[ edit ] Main article: They do not bear the signatures of the customers like ordinary cheques.
Instead, they bear a legend statement “Authorized by Drawer”.