The errors and frauds caused during various transactions can be detected only by a verified Chartered Accountant. Finding the root cause of simple errors and frauds present in the organization is the only way to eradicate it. This will be in the hands of internal auditors and control managers. Offering the best Auditing in Dubai, we try to eradicate them in a systematic manner. Now we can discuss the various steps involved in discharging these errors and frauds through Internal Auditing.
- Errors of Omission
- Errors of Principle
- Compensating Errors
- Errors of commission
- Errors of Duplication
The Error of omission
This includes a transaction that is in part or fully omitted from the book of accounts. Even though the trial balance is not affected, detecting such error is a hard fight.
Examples of transactions that are fully omitted from the book of accounts include:-
- The omission of purchase or sale from purchase book or sales book respectively.
Examples of transactions that are partially omitted from the book of Accounts are:-
- The payment or receipt transaction being omitted to be recorded in the ledger account.
The Error of Principle
It consists of not following the principles of Balance sheet and Accountancy. Tracing these errors from the trial balance is also not possible; because they are not created on purpose but for manipulating the accounts to inflate or deflate the profit.
Examples of such transactions are:-
- Less or more depreciation is provided.
- Not valuating the plant and machinery, stock, investment, and other assets according to the Principle of Accounting.
Compensating errors
Compensating errors compensates with the effect of an error with another error. The trial balance is not affected by such errors. But these may affect the profits of the year. As this doesn't affect the trial balance these can't be easily located by the Auditor.
The Error of commission
The Error of commission includes the errors that occurred wholly or partially when entries were made in the books of original entry.
Examples of such transactions are:-
- Purchasing goods for Rs 20,000 and entering as 2,000 in the purchase book.
- Adding wrong totalling in the purchase book as Rs. 1, 15,000 instead of 1, 51,000.
The Error of Duplication
Recording a transaction twice and posting twice in the ledger, it can be recorded separately without affecting the Trial balance. Detecting such errors is very difficult; it can be made possible only through minute observations of accounts. If two entries appear on the same side with the same amount, this will be the error of duplication.
