“But I intended to pay it all back, I really did,” Mr. J said as he talked to his manager. How did I ever get into this situation, he thought. Two years ago, Mr. J received the promotion for which he had been working so hard for. In addition, Mr. J’s new manager told him that Mr. J had a very promising future at the company. Mr. J and his wife quickly purchased a new home. Not long after, Mr. J and Janae had their fourth child, and life was great. After having their fourth child, Janae quit work to spend more time with her kids. Suddenly, things started to turn upside down. The economy took a downturn and had a negative impact on Mr. J’s company. His pay, which was based on commission, was reduced nearly 50 percent. Mr. J still worked hard but thought he should be paid more. Unable to find another job, Mr. J resentfully decided he would stay with the company even with the lower pay. Not long after he started receiving lower commissions, Mr. J noticed that the internal controls over the petty cash fund weren’t very strong. The records were not reviewed very often, and small shortages were usually written off. One week, Mr. J took $50. When questioned by his wife, Mr. J said he had found a few odd jobs after work. Mr. J continued this habit of taking small amounts for a couple of weeks. After realizing that no one had noticed the shortage, he started to take up to $100 a week. One day, another employee noticed Mr. J taking some cash from the fund and putting it in his wallet. When questioned, he simply stated that it was a reimbursement the company owed him for supplies. An investigation began, and Mr. J’s fraud was discovered. What simple procedures could the company have implemented to prevent the fraud from occurring? Give five control procedure. In addition to the five-control procedure you mentioned in No. 2, what would you recommend to prevent this fraud?
“But I intended to pay it all back, I really did,” Mr. J said as he talked to his manager. How did I ever get into this situation, he thought.
Two years ago, Mr. J received the promotion for which he had been working so hard for. In addition, Mr. J’s new manager told him that Mr. J had a very promising future at the company. Mr. J and his wife quickly purchased a new home. Not long after, Mr. J and Janae had their fourth child, and life was great. After having their fourth child, Janae quit work to spend more time with her kids.
Suddenly, things started to turn upside down. The economy took a downturn and had a negative impact on Mr. J’s company. His pay, which was based on commission, was reduced nearly 50 percent. Mr. J still worked hard but thought he should be paid more. Unable to find another job, Mr. J resentfully decided he would stay with the company even with the lower pay.
Not long after he started receiving lower commissions, Mr. J noticed that the internal controls over the petty cash fund weren’t very strong. The records were not reviewed very often, and small shortages were usually written off. One week, Mr. J took $50. When questioned by his wife, Mr. J said he had found a few odd jobs after work. Mr. J continued this habit of taking small amounts for a couple of weeks. After realizing that no one had noticed the shortage, he started to take up to $100 a week.
One day, another employee noticed Mr. J taking some cash from the fund and putting it in his wallet. When questioned, he simply stated that it was a reimbursement the company owed him for supplies. An investigation began, and Mr. J’s fraud was discovered.
- What simple procedures could the company have implemented to prevent the fraud from occurring? Give five control procedure.
- In addition to the five-control procedure you mentioned in No. 2, what would you recommend to prevent this fraud?
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