Internal Fraud Detection
Fraud can be detected by deliberate effort through internal control efforts or by coincidence or chance. When companies do not practice strong internal control, it leaves the door open for employees to misappropriate assets without being detected, except by chance. By the time fraud is detected by chance, it could have cost a company millions of dollars in misappropriated assets.
The first coincidence discovered by the magazine company was in the process of a new auditor in an effort to get to know his new company and their accounting codes taking invoices to a vice president responsible for approving payment on them. The very top invoice was a forged signature, and upon evaluation, more invoices were discovered to have contained forged signatures, which is what set up the investigation. According to (Global Economic Crime Survey), 13% of internal fraud is detected by...
Of that, 17% reported financial costs over one million dollars in asset misappropriation.
The second coincidence was discovered by the employee's secretary, who was on the same bowling team and a neighbor to the employee. The employee behavior was different when in office than at the bowling alley. The employee had extravagant behavior buying all the team drinks. When spending $800 on drinks, the secretary questioned about the ability to pay the high price. Even after being told the lie about his father-in-law dieing, no one checked to verify it. According to (Global Economic Crime Survey), suspicious transaction reporting was five percent and 70% believed fraud was committed to maintain living standards. The bowling alley transactions definitely qualified as…
