A Report on the Investigation on the Allegations against a Plant Employee of an Acquired Corporation, Lakes Inc - Essay Example

? Security and Loss Prevention Affiliation with more information about affiliation, research grants, conflict of interest and how to contact Security and Loss Prevention: A Report on the Investigation on the Allegations against a Plant Employee of an Acquired Corporation, Lakes Inc Introduction This report includes an investigation of an offence done by one of the plant employees of the company, Lakes Inc. This company deals with physical assets. From the investigation conducted on June 12, 2007, it was found that one of the employees is engaged in some internal fraudulent activities. The purpose of this investigation is to find out what exactly the offence is, and provide recommendations to the company for reducing such practices. Findings of the Investigation The investigation landed on a big clue, which made it clear that the offence was done in the preparation of invoice for purchase of items. From this case it was found that actually, the invoice was supposed to be prepared for purchasing high definition flat screen television but the prepared invoice was in the name of a computer server. The investigation is carried out from August to November 2009. In the mean time, it was also found that the employee has submitted the invoice through the purchase department for a refund amount of $8,795.60. Due to this issue, the director of purchasing department, Mr Bob Smith, and the administrative assistant, Ms Mary Bad, had to be terminated from the company. The company maintains a database for all the items they purchase and a particular code is fixed for the items, which relates to the work done by the administrative assistant. As part of the investigation, a visit was made to all the stores from where the goods were purchased. The manager of one store said that in the past six months, Bob Smith had done two more purchases and these items were delivered either to him or his assistant. He showed the invoices of these items that had been purchased. When comparing these with the plant invoices, the file had only copies. Everything in the invoice except the name of the items was similar. The director of the purchasing department and the administrative assistant are the culprit in this case. They cheated the company and this had been continuing for several years. The invoices, the proof and the statement of the store manager have been apt evidences for this particular investigation. Bob Smith and Mary Bad were cheating the company by making false invoices and purchasing costly items with the company’s earnings. They might even resell these items at a higher price and make more profits out of it. The case is found to be misappropriation on purchasing the asset. There are various schemes for asset misappropriation such as “skimming, cash larceny, fraudulent disbursements, and non-cash larceny and misuse” (Albrecht n.d pg 2). Misappropriation of the Asset Fraudulent Disbursement Scheme From these schemes, the one, which is similar to the case under study here, is the fraudulent disbursements scheme. Asset misappropriation schemes consist of “those frauds in which a perpetrator employs trickery or deceit to steal or misuse an organization’s resources” (Albrecht n.d pg 1). In this case, both the director and his assistant have taken assets of the organization to benefit themselves. Here, misappropriation of assets occurred during the purchase of goods and services. The organization pays extra for purchased goods and services, as all of them were not used in the plant. It includes a billing scheme, which involves employers making payments based on false invoices for personal purchases as done by Mr Bob Smith and Ms Mary. Such type of asset misappropriation frauds are serious enough, which result in material misstatement of the financial statements of the organization, without the knowledge of the management. Finally, the company incurs a huge loss and a lot of damages. Final Results of the Investigation Asset misappropriation is a major problem for all the organization. When such a misappropriation takes place, the people involved undergo personal and professional humiliation, legal consequences, incur legal fees and experience negative publicity, loss of job and career. Frequently, the culture and morale of the organization is badly affected, consequential in lost productivity, increased employee absenteeism and turnover. Similarly, it should not be different for Mr Bob and Ms Mary and they should be treated the same way. They should be given a suitable punishment for cheating the company and misusing the company’s corporate purchase card for so many years. Sometimes, in an organization some employees are involved in fraudulent practices unknowingly or under the pressure of their direct superiors. But here it is evident that Mr Bob Smith has committed the offence purposefully and the assistant was also involved in it and criminal case should be filed against them. Recommendations Keeping in view the causes of fraudulent activities on this particular case, some recommendations could be given to reduce the fraudulent activities in the organizations: Most of the employees engaged in double-dealing have the belief that they will not get caught or if he or she does get caught, nothing serious will happen. This should be changed and they should understand that getting involved in such an undertaking would bring them serious problems and entail in grave consequences. Every company needs to appoint “certified fraud examiners” (Certified Fraud Examiner n.d para) to find out any offence which takes place in the beginning itself. A close watch on the assets purchased should be made weekly and monthly and also the invoices of both the company and the vendor by an accountant or someone from the purchasing department should be examined. A good system of “internal controls” (Moorthy 2009 pg 261) will help to prevent and stop asset misappropriation schemes from taking place within organizations. Fraud detection techniques should be adopted in recognizing and follow-up on fraud signs or red flags. Conclusion The investigation concluded reporting that in Lakes Inc, the director of the purchasing department and the administrative assistant have both committed a fraud by making false invoices and cheating the company for a long time. This case is a good example for all companies. They need to concentrate more on fraudulent activities and fraud prevention measures need to be undertaken, thereby eliminating various chances for frauds to occur. Creating a culture of honesty involves employing honest people and providing fraud awareness training as well as generating a positive work environment. Reference List Albrecht, C. (n.d). Asset Misappropriation Research Write Paper For the Institute for Fraud Prevention. Theifp.org. Retrieved from< http://www.theifp.org/research-grants/IFP-Whitepaper-5.pdf > Certified Fraud Examiner (n.d). usf.edu. Retrieved from Moorthy, K. (2009). Preventing Employee Theft and Fraud. European Journal of Social Sciences. Retrieved from< http://www.eurojournals.com/ejss_12_2_09.pdf> Read More