Asset misappropriation schemes are frauds in which the perpetrators use trickery or deceit in order to steal or misuse the resources within an organization. When asset misappropriation occurs the specific assets of the organization are taken directly for the benefit the specific person who is committing the fraud. People who are in a position to commit asset misappropriation related crimes cane be employees within an organization, vendors or customers of an organization, or it could also be people who are totally unrelated to the victim organization. A distinguishing element when it comes to asset misappropriation is the fact that the assets belonging to the organization are taken through deceitful or trickery means rather than through force. The actual act of asset theft concealment and conversion should all be present. Asset misappropriation is a major problem in organizations all over the world. Research suggests that organizations loose almost 7% of their total annual revenues to asset misappropriations (Albrecht, Kranacher, & Albrecht, 2010).
When asset misappropriation occurs there are no winners. Those involved are almost always caught and end up suffering professional and personal embarrassment. They end up loosing their jobs and career and the matter ends up in the courts where they are faced with legal consequences. The organization looses since in addition to their assets being stolen, they end up using money on legal fees and they experience negative publicity.in most cases the culture and morale of an organization is affected adversely leading to a loss in the productivity, an increase in employee turnover and frequent absenteeism (Albrecht, Kranacher & Albrecht, 2010).The paper will look at an organization that was a victim of asset misappropriation highlighting on the specific type of asset misappropriation. There will also be an assessment of some factors that contributed to the misappropriation.it will also look at legal mechanism that could be employed to recover the assets.an assessment of the responsibility of the management to share information that is related to the breach with various shareholders will also be done. A review of the AICPA statement on auditing standards (SAS) No.99 will also be done. Finally a review of the governance plan and fraud prevention plan of the organization will be done.
Type of asset misappropriations
Steel world automobile is an organization that was faced by asset misappropriation. The perpetrator of this asset misappropriation was the finance manager. The type of asset misappropriation that was taking place within the organization was fraudulent disbursement. He did this through a variety of schemes including billing scheme whereby he used to make payments which were based on false invoices for some of his personal purchases.at the same time he used to tamper with cheques by altering or forging the cheques in the organization for his own personal use. There was also some form of asset reimbursement whereby he used to make false claims of factious business expenses. All these actions resulted to the organization's income being reduced. This means that some additional revenue would be required so as to restore the net income to what it was meant to be if the theft would not be going on than merely the actual loss from the fraud (Coenen, 2012).
It can be hard to understand how these schemes were executed within the organization without being noticed. First of all we know that asset misappropriation schemes always start small and they get larger as the perpetrators build some confidence in their ability to get away scotch free without their dishonest acts being noticed. The finance manager obviously faced a challenge from internal and external audit that threatened his attempts at concealment and probably caused his scheme to be discontinued for a period of time. However, the threat passed and he continued with the scheme until the fraud was detected. The dollar amount of the scheme always increases with time and the amount the finance manager steals in the first days or months of the fraud scheme gradually increases exceeding the average amount that was taken when he was starting the scheme.
In this case we can say that poor management is what led to the success of the scheme. First of all we can see that the perpetrator of the scheme was a finance manager. This outraightly shows the system of management in the organization is quite wanting. If proper management system were in place then no one especially in the capacity of a finance manager would have even attempted to carry out such a scheme. With such poor management it means that nothing within the organization is followed up. Every manager is given the task of overseeing their specific role and the general manager does not in nay way try following up on the specific managerial dockets. This poor management system therefore gave the finance manager the space to carry out his schemes successfully. The weak internal control is what played a major role in the asset misappropriation taking place.
Legal mechanisms used to recover assets
Once the fraud was detected the perpetrator is supposed to be taken through the justice system where they could be charged and the organization recovers the assets. The problem with many organizations is that they often do not prosecute perpetrators they opt to dismiss them quietly without nay civil or criminal action against them so that they can avoid bad press which comes with the prosecution of the perpetrator. The civil and criminal justice system is the most appropriate way of dealing with a perpetrator of fraud. This is because the perpetrator is charged in court and the charges levered against the person are supported by evidence that is brought forward. This means that the perpetrator can not escape as there is clear evidence that supports his fraudulent action. When a perpetrator is charged in the court the organization will get the opportunity of recovering their assets. This is opposed to if the organization chooses to dismiss the perpetrator silently as they will not have any base of claiming their lost assets.in courts the perpetrator will be ordered to return the assets to the organization.at the same time taking the case through a civil or criminal system comes out as a warning to other employees who might be planning to take part in fraud. But when the perpetrators are dismissed silently then other people will not be afraid of carrying out fraud since the worst that can happen is being dismissed (Peltier-Rivest, 2011).
The management is charged with the responsibility of giving out information that affects the organization to stakeholders. This is because the stakeholders have the right to know everything that goes on within the organization especially when it comes to the resources or assets. The management should therefore share information of any fraud that take lace within the organization and the actions they took to the perpetrators of this. The management should also ensure that 6 they inform the stakeholders on the measures which they have put in place to ensure that no asset misappropriation takes place within the organization. They should also inform them on the actions they intend to take in order to recover the assets incase such incidences occur. All these information should be conveyed through meetings where the stakeholders are also invited to give their views and opinions on the matter.it is important to share such information to the stakeholders of an organization since it could be very bad if the stakeholders get to find out such vital information through the press.
AICPA Statements on Auditing Standard (SAS) No. 99
This section establishes standards and gives guidance to auditors when it comes to the fulfillment of responsibility to plan and perform audit for obtaining reasonable assurance about whether financial statement are free of material misstatement the way it relates to fraud.it therefore requires that auditors collect necessary information when it comes to the identification of risk of asset misappropriation. Some of the risk factors include aces to key IT operation staff that includes operations, system development personnel, and security.in the case of the organization in question the risk factors that were prevalent was access to the system operations. The organization should come up with a plan that reviews the risk factors regularly so as to determine occurrence of fraud. This is because if the organization does so then the chances of fraud occurrence will be minimized as the risk factors are minimized.
Corporate governance plan
The organization has two-tiered Board of Directors as a means for the improvement of corporate governance. The two tired board consist of the Executive board which comprises of the organizations executives who oversee the day-to-day operations of the organization and the second one is a supervisory board made up of no-executives who represent the shareholders, the supervisory board is responsible for hiring and firing members of the executive board, decide their compensation and review their business decisions. This governance plan is quite effective as the executive directors are checked by the supervisory directors and hence the organization runs smoothly this the…