How do forensic specialists proceed to detect fraud in a manufacturing company?

How do forensic specialists proceed to detect fraud in a manufacturing company?

To show how Forensic Accounting Services in Delhi work, let’s look at the most common types of corporate fraud in a manufacturing company. It is found in the areas of procurement, production, and sales. It also includes two additional cost areas- personnel and non-production costs.

In each of these links, a leak of funds is possible. But before proceeding to check the listed zones, the Forensic Accounting Services in India orient the search process. It is a compilation of a list of people who may be involved in incidents of corporate fraud and corruption.

How do forensic specialists detect fraud in the procurement area?


A common fraud scheme is the purchase of surplus raw materials to sell unaccounted products in collusion with other employees.

This scheme is often used when an employee purchases goods from his supplier at an inflated price and shares the amount of the overpayment with him in half. This also includes the purchase of goods of inadequate quality.

Forensic specialists conduct a thorough search, which reveals:

  1. Choosing your supplier on unfavorable terms for the enterprise, as well as a fraud during tenders:
  • Purchase of low-quality products and raw materials;
  • Purchase at inflated prices;
  • Fictitious, double or excess purchases.
  1. Providing individual suppliers and contractors with benefits that discriminate against the interests of the business owner:
  • Unreasonable advance payment of deliveries, works, or services of counterparties, including in case of non-fulfillment of the mandatory conditions for this;
  • Intentional advance payment of deliveries, works, or services for the subsequent planned recognition of accounts payable as bad and irrecoverable.

How do deal with fraud in the production area?

Most often, in companies where corporate fraud thrives, they unreasonably write off defects or manipulate classifiers and directories.

Another common scheme is a parallel business. Suppose there are two founders in an organization. One of them is not engaged in the affairs of the company. The second, upon receipt of the order, instead of fulfilling it by the company, hires a subcontractor.

At the same time, a company that is its property acts as a subcontractor. In egregious cases, the staff of the main company is the staff of the parallel company. This is how funds are withdrawn from the business, bypassing one of the founders. Forensic Accounting Services in Delhi

Often, fraud in a company thrives on the accumulation and sale of unaccounted finished products, surplus raw materials, semi-finished products, and other materials (spare parts, fuels, and lubricants). This is usually done through:

  • manipulations with production standards, waste and reject standards;
  • Distortion of readings or intentional breakdown of control and measuring equipment, including video surveillance;
  • Distortion of warehouse or production accounting data;
  • Insufficient detail in documents confirming the write-off of raw materials, and semi-finished products;
  • Intentional planning errors.

Forensic specialists identify where unrecorded finished products and excess materials are formed. Together with the main verification methods at this stage, additional ones are also used:

  • Specialized and tailored to the needs of the client analytical tests (Forensic Data Analytics), helping to narrow the perimeter for a more detailed check;
  • Analysis of the affiliation of employees and contractors;
  • Computer forensics, including the analysis of integration and access rights to various databases.

As you can see, there is never a single source of fraud and since the possibility of fraud comes from different directions, it is also quite difficult to detect it without specialized knowledge. So, it is best to opt for Forensic Accounting Services In India.

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