Question

CPA Australia's advisory guide on employee traud identifies some typical ways that fraus carried out. These included:

(a) creating ghost' employees or not deleting ex-employee records and having the salary these ghost employees paid into the fraudster's bank account

(b) creating bogus suppliers, with payment being made to the fraudster's bark accaunt

(c) creeting bogus purchase orders of a bona fide supplier and substituting the supcier bank account details with fraudster's bank account detals (d) obtaining kickbacks or bribes from suppliers or contractors (as an inducement to puk from them)

(e) associates of the staff providing services to the business at infiated prices (0 personal use of business resources ) intiated/bogus reimbursement claims th) manipulation of financial data to receive performance-based bonuses

(j) faking time sheets O private purchases through business accounts/business credit cards

(K) providing discounted (or free) goods or services to friends and associates.

Required

For each of the above:

(i) Suggest a possible application control that could deal with the fraud.

(ii) Classity the control as preventive, detective or corrective and justify your classification

. (iii) Explain how the control addresses the fraudulent activity

Answer 1

	Problem	Control Description	Control Type	How control addresses fraud
(a)	creating ghost' employees or not deleting ex-employee records and having the salary these ghost employees paid into the fraudster's bank account	Without input of Last Date, Last salary shall not be processed. Once, Last salary is released, employee record will move from current employee to ex-employee list automatially	Preventive	This control ensures that resigned employees are not paid
	Employee record creatin shall be approved by reviewer and mandatory records like DOB, PAN is required	Preventive	This control ensures that employee record is reviewed for ghost employees and system prevents bogus employees by requiring certain details.
(b)	(b) creating bogus suppliers, with payment being made to the fraudster's bark accaunt	Supplier record requires compulsory bank details being recorded in system and reviewer approves the supplier record creating with documents and cancelled checks. Further, supplier record cannot be edited without approval of Purchase department head	Preventive	This control ensures that payment and supplier details are reviewed and approved. Also, edit is prevented
(c)	Creeting bogus purchase orders of a bona fide supplier and substituting the supcier bank account details with fraudster's bank account detals	Supplier record cannot be edited without approval of Purchase department head	Preventive	Edit is prevented and requires system approval by Purchase department head
	Purchase orders are approved by the Purchase department head	Preventive	System approver ensures that a bogus PO record cannot be created
(d)	obtaining kickbacks or bribes from suppliers or contractors (as an inducement to puk from them)	Calling for multiple purchase quotations before order is placed	Preventive	This ensures that company orders cheap and best product
(e)	associates of the staff providing services to the business at infiated prices	Calling for multiple purchase quotations before order is placed	Preventive	This ensures that company orders cheap and best product
(f)	personal use of business resources	Monitor usage of resources and perform physical inspection of assets	Detective	This control identifies misuse of the assets
(g)	intiated/bogus reimbursement claims	Require submission of supporting documents. Approval required for claims before payment	Preventive	Ensures that all the claims are based on supporting documents and are reviewed
(h)	manipulation of financial data to receive performance-based bonuses	Financial data cannot be edited/ altered by anyone	Preventive	Ensures no manipulation of record at any level
(i)	faking time sheets	Attendance to be mapped by installing a finger thumb register which automatically registers the entry and exit time	Preventive	Ensures no absentee able to mark timesheets
(k)	providing discounted (or free) goods or services to friends and associates.	Details of the receipeint of goods or services are reviewed.	Detective	Ensures that no friends or associate given these benefits
(o)	private purchases through business accounts/business credit cards	Review of bank statement and requiring explanation	Detective	Ensures that genuine business purchases are paid