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Preventing Employee Fraud

1. Do you know what types of cash collecting procedures your company uses to safeguard against fraud?
2. In today's economy we assume that fraud may be more prevalent because employees may be more desperate for money. The reality is that many companies are closely monitoring their financial situation - cutting jobs, decreasing expenses, monitoring cash flow. Employees are well aware when these cost savings methods are implemented in their company, so do you think this could actually act as a deterrent to fraudsters?
3. When large companies have a centralized payroll department, how can they be sure that new employees who have all the paperwork are really employees?
4. What other ways can we detect if someone is booking false revenue?
5. Aside from showing statistics of fraud and quoting company policy, how do you explain the importance of approvals to management?
6. There was an obvious lack of controls in this procedure. What type of fraud could have occurred in this company and what controls would you put into place to avoid that fraud?
7. As an auditor, is there a method we can use to detect if a small business owner is skimming when there is no inventory?
8. What are some of the implications of assessing control risk too low?

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Step 1
The cash collecting procedure that my company uses is that the person responsible for collecting cash is given a copy of customer order, invoice and an authorization to collect cash. The company assumes that each customer has paid cash unless the collector returns the documents of a particular customer and enters the reason for nonpayment. The collector is required to deposit cash with the bank and submit the receipt to the supervisor of the collector. I am told this procedure prevents fraud because the employee must either return the documents of the customer or deposit the bank receipts.

Step 2
No, cost cutting measures like cutting jobs, decreasing expenses, and monitoring cash flow are a part of the policy of the company. These measures reduce costs but these do not reduce frauds. Frauds are reduced by strengthening the internal controls of the company. Taking measures like segregation of duties relating to cash, requiring authorization when carrying ...

Solution Summary

This posting gives you a step-by-step explanation of Preventing Employee Fraud . The response also contains the sources used.