Question

An accountant with the Sports event s has been charged with stealing over $60,000 for buying a Mercedes-Benz and investing in a deposit check. Police claimed that he had produced fake invoices from two companies which had contracts with the sports committee.

He then wrote checks to pay the fake invoices and deposited them into a bank account which he had opened under one of the companies 'names. He cooperated with the police when he was arrested to the point that he told them about the fraudulent bank account and the purchase of the Mercedes-Benz. The accountant was a recent honers graduate from a prestigious university who was a very trustworthy and dedicated employee, supervisors said.

1. write the Introduction and conclusions

2. What fraud scheme did the accountant use to execute his fraud?

3. What controls could have prevented his fraud?

4. What controls could have detected his fraud?

Answer 1

1.The accountant committed a fraud by generating a fake invoice with the help of the regular suppliers of the company and had latter issued checks to pay such fake invoice into a Bank account of the supplier company.

2.A billing scheme involves an individual submitting false invoices that the business issues payment on; while the disbursement of funds is legitimate, the payee is fraudulent. The two most common ways this scheme occurs is through the use of a “shell” company—which then issues the false invoices—or by simply double-paying a legitimate vendor.

3.Detecting frauds of billing scheme can be as easy as looking at the way a legitimate invoice from a vendor has been altered. With a suspected shell company, a simple investigation of the shell and its relation to the organization can unmask the fraud.

Here again, checks and balances aid prevention. Split the duties of ordering, approving vendors, recording invoices, paying vendors, and reviewing bank accounts among different positions to lessen the chances of a billing scheme.

A good strategy for combating billing fraud is to incorporate separation of duties for the various billing and bookkeeping functions.

• Separate your accounting duties: Accounts Payable, Accounts Receivable, & Authorization/Check Writing
• Use Purchase Orders, or enact separate approval on invoices before handing them to the bookkeeper
• Separate bank reconciliation from bill payment
• Use electronic bill payment with built-in work flow.

4. Such fraud appear to be for legitimate goods or services. In this case, however, no product was ever delivered. What makes this trick so difficult to spot is that the bills come from vendors the company regularly use. Knowing this, the scammers rely on the chances that no one will question the validity of the bill. One giveaway of this tactic is when the goods listed on the bill can’t be accounted for in inventory, or there is no PO to match the bill in question.