Question

In: Accounting

The A/P clerk of a company writes the checks for vendors, and the controller signs the...

The A/P clerk of a company writes the checks for vendors, and the controller signs the checks. The A/P clerk has devised a plan to give herself a raise. She creates a new vendor for her friend's business and creates two purchase orders for random car detailing services for $75 and $70. She writes the checks to pay these new vendors knowing the controller will only pay close attention to checks over $100. She delivers the checks to her friend to deposit in his bank account, and then he writes her a personal check for the full amount of $145.

Eventually, what will be the effect of her actions? What can the company do to prevent this type of behavior?

Answer in 100 words or more.

Solutions

Expert Solution

Hi I found this question is very interesting below i provided the answer best of my knowledge

Occupation fraud is a growing problem; fraud is not 100% preventable but there are steps that can prevent or chances of fraud reduce on ongoing basis.by this type of fraud company will lose huge amount of money in future even small amount make huge in future, following step should be taken by company to avoid such type of fraud

  1. in given case company should make a provision where every service must be attached to its customer or revenue, like company providing services then it must have assign to its revenue and credit period of customer verses vendor should have difference of 15 to 30 days, after receiving fund from customer then only vender payment permissible,
  2. there must be every internal audit not only about financial even amount employee relation with vendor or customer,
  3. Some time even asked controller not to just sign the cheque but ask question on random basis any on small amount cheque, as they are first responsible person when any fraud will detect
  4. System improvement is very must along with process to avoid fraud

Hope that about provided solution is sufficient


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