Fraud Is a Growing Problem in Today\'s

¶ … Fraud is a growing problem in today's business world, and this article chronicles the capture of a purchasing manager defrauding his organization. The author follows step-by-step the accountant called in to decipher just how the manager was defrauding the organization. Immediately, CPA Chris Rosetti discovered two flaws in the state agency's internal controls. The manager was not forced to take a vacation every year, and the manager also had approval powers overstepping his position. Author Wells notes, "Once employees start committing fraud, they can't take time off because they need to constantly cover up what they're doing. The second deficiency was that Bruce [the manager] was allowed to approve new vendors" (Wells). Rosetti methodically goes about deciphering Bruce's activities while discovering more and more discrepancies between purchases, costs, and vendor files. As Rosetti dug deeper during Bruce's unplanned absence to take care of his ill wife, he discovered a number of vendors with the same address and tax I.D. number. Over a five-year period, these vendors had received over $350,000 and all the payments had been just under Bruce's approval limit for expenditures. Bruce was caught, and Rosetti systematically kept a duplicate set of copied records in his own office as insurance his charges against Bruce would stick in court. Rosetti also devised a way to confront Bruce where he would not be expecting it, and quickly got a verbal confession out of a relieved Bruce, who was happy the situation was out in the open. Rosetti turned the verbal confession into a written statement to help ensure a solid court case, too.

When confronted with his fraud, Bruce confessed, and it was discovered that most of the payments went to a vendor who would kick back a small percentage of the money to Bruce. He only got about $3,500 from the scheme, but lost his job and served six months in prison. The vendor was not prosecuted because of a technicality, but of course, he did lose his lucrative "side" business.

The article goes on to list some warning signs of fraudulent behavior, and lists some things to watch for in employees, too. As Wells notes, "The agency could have easily avoided this crime by using simple but effective control measures" (Wells). Sadly, everyone suffered because these measures were not in place. The agency lost money and an otherwise good employee, Bruce lost his job and his career, and the vendor lost what could have been a long-term and lucrative real contract. Fraud is all too prevalent in business, and this article shows just how easy it can be to defraud a company, and how diligent companies should be about fraud and other monetary issues. Finally, the article gives numerous research opportunities for further study into preventing and discovering fraud.