Fraud 2

Perpetrator physically prepares the fraudulent check

• Depends on:
• access to check stock
• access to bank statements
• access to cash disbursements journal
• ability to forge signatures or alter other information on the check

An employee misappropriates a check and fraudulently affixes the signature of an authorized maker

• must have: access to a blank check
• convincing forgery of an authorized signature
• ability to conceal the crime

• Employees having access to company checks
• Employees lacking access to company checks
• producing counterfeit checks

• Maintained under lock and key
• access limited to those with check preparation duties
• boxes of blank checks should be sealed with security tape
• periodically check the security of unused checks
• voided check should be promptly destroyed
• checks should be printed on watermark paper with security threads and distinctly marked paper
• out-of-sequence cancelled shecks and duplicate check numbers should be investigated
• each day the first check of the day should be reconciled to the last check written the previous day

• Free hand forgery - may not need to be particularly accurate
• Photocopied forgeries - made of legitimate signatures and affix to check
• Automatic check- signing mechanisms - produce perfect forgeries

• Employee intercepts a company check intended for a third party
• Signs the third party's name on the endorsement line of the check

• Employee intercepts a company check intended for a third party
• Payee designation is altered so the check can be converted
• Less chance of discovery unless canceled checks are reviewed during reconciliation

• Employess prepares a frudulent check and submits it along with legitimate checks
• check is payable to the employee, and accomplice a ficticious person, or a ficticious business
• occurs when checks are signed without proper reveiw or reviewer is busy
• in many cases, only the signature line is exposed and the payeee is concealed

• Employee with signatory authority writes a fraudulent check
• overriding controls though intimidation
• poor controls

• Fraudster reconciling the bank statement
• re-alteration of checks
• Falsifying the disbursements journal
• reissuing intercepted checks
• bogus supporting documents

• Abusing legitiate access to employer's payment System
• gaining access through social engineering or password theft
• Exploring weaknesses in internal control or payment system

Occupational frauds in which a person who works for an organization causes that organization to issue a payment by making a false claim for compensation

• ghost employee schemes
• falisified hours and salary schemes
• commission schemes

Someone on the payroll who does not actually work for the victim company

• ficticious person
• friend or relative
• accomplice

• adding the ghost to the payroll
• collecting timekeeping information
• issuing the ghost's paycheck
• delivery of the paycheck

• Pay is based on an employee's output rather than hours worked or a set salary
• Falsify the amount of sales made
• Frudulently increase the rate of commission

• Employees are reimbursed for expenses paid on behalf of their employer
• business purpose explained and receipts attached per the organization's guidelines

• Purpose of reimbursement request is misstated
• fraudster seeks reimbursement for personal expenses
• Perpetrators are usually hihg-level employees, owners, or officers

• altered receipts
• overpurchasing
• overstating another employee's expenses
• orders to overstate expenses

• Producing ficticious receipts
• obtaining blank receipts form vendors
• claiming the expenses of others

• A single expense item is submittes several times to receive multiple reimbursements
• Submit the credit care receipt for items charged to the company's credit card account
• submitting the same expenses to different budgets

• False refunds
• False voids

• A refund is processed when a customer returns an item of merchandise purchased from the store
• merchandise is placed back into inventory
• purchase price is returned to the customer

• fraudster takes cash from the register in the amount of the false return
• debit is made to the inventory system showing that the merchandise has been returned to the inventory

• fraudster overstates the amount of a legitimate refund and skims the excess money
• customer is paid the actual amount owed for the returned merchandise and the excess is kept by the fraudster

• refunds appear as credits to the customer's credit card rather than as cash disbursements
• Perpetrator does not have to pysically take the cash from the register
• refunded to the prpetrator's credit card

• also generate a disbursement from the register
• copy of customer's receipt is attached to the void slip
• managers must generally approve voided sales
• rubber stamp approvals allow the fraud to succeed
• management and the employee may conspire

fraudsters typically do not make any effort to conceal the shrinkage

• small disbursements
• destroying records