Question

• Muhanad is a new hire in the accounting department of Jawwal. One of your responsibilities is the reconciliation of the operating account. After the end of the month he is given a copy of the bank statement and listing of checks paid during the month, and is instructed to perform bank reconciliation. He notices that there are some faint markings on a portion of the bank statement that could be alterations.

What steps would you advise him to take in performing the reconciliation?

• Hassan Ali works for Paltel Group as the customer service supervisor. When Nadia was hired into is department, he listed her start date as one month before she actually began work. Accordingly, the payroll department generated an extra paycheck for Nadia, which Hassan intercepted and cashed.

What type of fraud is this? What steps should Paltel take to prevent or detect such cases?

Answer 1

Ans-1

The Bank statment is a key document for performing Bank Reconciliation as it reflects customers account in books of Bank.In the current case the statement provided gives rise to suspicion therefore , it could be possible that figures have been tinkered by somebody in order to hide any possible fraud done.Before proceeding with the reconciliation.Most likely and lethal fraud could be as cash shown deposited in the bank which actually was never deposited and the entry and balance of statement accordingly have been manipulated.

Therefore a statement directly from the Bank needs ro be taken or downloaded from bank's website and that should be used for reconciliation.

Ans-2

This type of fraud can be called as - Ghost Employee fraud or a Wage falsification fraud.

Showing Nadia as an employee when she had not joined is same as using the "Ghost Employee" technique.

Also the Wage list was manipulated with inflated expense.

Suggestion for Prevention/Detection:

Such frauds can be detected with the Employee list reconciliation between Payrol team and HR team before evey pay cycle..

Facilitating employee joining or leaving is primarily prerogative of HR function.Payroll list of employees and HR list cannot be different.In this case departmental record was relied and hence fraud got perpetrated.