Question

For each of the following independent cases of employees fraud, state the type of fraud and propose five controls you would implement to address the fraud risk. Label each control as preventive or detective.

The front desk cashier for Financial Services is responsible for receiving auto loan payments from customers. When the payment is cash, he pretends that the payment is received but that he can't produce the receipt as the system is down. He pockets the cash and writes down the customer information, the amount, and statement date for future reconciliation. Then, he uses money from the next customer and credits it to the first one to show that the payment is received and cashes the difference. He has continued to do this and misapply customer payments for more than 2 years; no one knows about this issue.

The purchasing clerk for a small retailing company in Alberta takes advantage of his position and network. Through his brother-in-law’s inactive company, he creates fake invoices, approves the purchases, and orders the payments. Once the payment is received, he shares it equally with his brother-in-law.

The payroll assistant for a firm knew about a temporary employee’s contract termination. Before the employee’s last day, the payroll assistant updated the bank account information on record for that employee with his girlfriend’s bank account information, and then produced the paystub and pocketed the money.

Answer 1

These are the kinds of employee frauds which exists when there is lack of internal control.

Front desk cashier:

1. Proper evaluating of cash received by sending the cashier to a vacation.

2. Surveillance cameras.

3. Payment through updated monetary aspects.

4. Sudden petty audits.

5. Appointing other person as cashier and handling the former one to front desk only.

Purchasing clerk:

1. Properly educating and motivating the employees.

2. Matching the invoice, order and receipt reduces this kind of fraud in entirety.

3. Following systematic payables or receipts.

4. Payments reconciled for costumer protection.

5. Making employees aware of the consequences of the fraud.

Payroll assistant:

1. Conducting proper audits by verifying paychecks.

2. Physically distributing the checks if possible.

3. inspecting the employee forms properly and eliminating the fraudulent aspects in them.

4. Cross checking the payroll register and the employees

5. providing unique password for each and every employee.