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Management Controls and Vulnerability to Fraud

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Research the topic of internal controls and outline the set of these controls that would apply to your current, or a former, organization of which you are familiar. This could be government, nonprofit, or for-profit. The organization should have at least 40 or more employees. Outline where there may be areas that could be vulnerable to fraud such as cash handling; financial statements; supplier relations; inventory; general company assets, or other areas. You may focus on one area of the organization if there is sufficient material for an in-depth analysis, that is, inventory controls for a large retailer). What are the associated internal controls management would want to have in place and why? How great are the risks of fraudulent activity in these areas to the organization? Which key management areas of the organization would be essential in assessing risks and implementing controls (that is, accounting, finance, production, operations, sales, warehouse, retail locations, or other areas) and why? How do those controls fit into addressing one or more aspects of a fraud model or theory?

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The Solution provides some examples of a company's potential vulnerability to fraud and methods to assess and manage the risks.

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Outline where there may be areas that could be vulnerable to fraud such as cash handling; financial statements; supplier relations; inventory; general company assets, or other areas. You may focus on one area of the organization if there is sufficient material for an in-depth analysis, that is, inventory controls for a large retailer).

In reference to the areas FedEx corporation is susceptible to fraud, these include employee fraud, fraud in the supply chain with multiple stakeholders, and the most shocking culprits are executives and senior management whose positions within the company help shield their criminal activity according to the research literature. Businesses whether large or small experience fraud as all businesses will encounter some level of fraud that occurs throughout the workplace, but the most destructive and costly forms of employee fraud are perpetrated by executives and senior management. This is more relevant for the Supply Chain industry because this industry has been shown to be more prone to heightened risks of fraud because of the high volume of goods as well as financial transactions with varying groups of customers and suppliers who are all susceptible to fraud as unfortunately this is a part of human nature for those who commit fraud. Researchers have found that high level management constitutes the largest fraud risks because they're usually considered beyond suspicion by subordinates and the company itself. Because of their position within the company, they can manipulate and circumvent internal and external controls while also colluding with others under their supervision or direction.

The sheer massive volume of deliveries for FedEx, which during the company's peak season balloons to over 34 million daily packages, constitutes a large percentage of the risks faced by companies such as FedEx as shipping fraud increased annually in the United States and are expected to continue to climb for many years. One of the most common forms of fraud conducted by criminals is fictitious pickups wherein employees at shipping facilities and warehouses are duped by thieves who pose as legitimate truck drivers working for transportation companies. This particular form of fraud is very complex to fight because those committing the fraud resemble actual legal vendors and arrive with fraudulent paperwork that looks authentic and can easily trick even the most seasoned professionals within the industry. As aforementioned earlier within the summary, these lower thieves often work directly with upper management unfortunately as they often are given inside knowledge about the loads from people working for the company they are stealing from, which assist them in their criminal pursuits.

Fraud is as old as legitimate business purposes throughout the shipping industry and transportation industry, but with the onslaught of new technology, this age-old crime has been combined with cyber-crime to pose a ...

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