Detecting Fraud in the Real World - Case Study Example

Executive Summary Frauds are increasing in the daily routine business which has resulted in taking steps so that the acts of frauds are controlled and the business is able to ensure better strategies to grow. This has made wide changes in strategies and ensured development of new ways to tackle it. This report presents the manner in which different frauds were committed due to negligence on the part of the management or people. Ensuring strategies through better governance, monitoring, and carrying out the responsibility will ensure that frauds are reduced. This will also ensure better chances of growth and will help to protect the image and goodwill of the company to ensure better opportunities of growth. Table of Contents Introduction 3 Case 1 3 Highlights of the case 3 Type of Fraud Occur 4 Manner in which fraud affects 4 Strategy to reduce it 4 Case 2 5 Highlights of the case 5 Type of Fraud Occur 5 Manner in which fraud affects 6 Strategy to reduce it 6 Case 3 7 Highlights of the case 7 Type of Fraud Occur 7 Manner in which fraud affects 7 Strategy to reduce it 8 Case 4 8 Highlights of the case 8 Type of Fraud Occur 8 Manner in which fraud affects 9 Strategy to reduce it 9 Conclusion 9 References 11 Introduction Organizations continuously witness frauds which have to be dealt in the best possible manner and strategies have to be made to combat it. Frauds not only result in a financial loss for the business but also bring a bad name to the company and have an effect on the brand name. It is seen that businesses continuously look towards filling the smaller gaps which exist in their day to day work so that scope of having frauds can be limited. This paper looks to examine the different cases of frauds which have taken place and the manner in which the frauds could have been bought to the limelight and steps could have been taken to reduce those. This paper also builds on the ways through which the frauds can be reduced and further looks to present the mechanism which will guide business through the process of having a clear picture and conducting their daily affairs in a normal manner. Case 1 Highlights of the case The case highlights a situation of fraud where the employee of the same company has used his peers’ credit card and purchased goods. The incident was noticed only when the bill for the card was generated and the amount was in tune of $800,000. The person involved in the fraud had a good reputation and the employees and his fellow colleague had words of praise for the person showing the false image the person has developed and was of the view of using others person belongings. Type of Fraud Occur This type of fraud occurs because of the fact that the details pertaining to the credit card has been leaked. Since, the person who has committed the crime belongs to the same group and has relation with the other person whose card has been used it becomes easy for the person to get personal details of the person. The fact that the person has been working together made it easy to get the details. In addition to it there are numerous websites which allows the person to purchase the goods online and pay through the use of credit card has further ensured that the fraud can be easily committed and has thereby provided the scope and space to conduct such an act and commit fraud by using the details of other persons. Manner in which fraud affects The fraud committed in this situation raises concern on the relations that the peer’s have and also makes the other person suspect each other. This situation also highlights that the greed to purchase and use someone else’s belongings makes a person commit crime and makes them take the path of fraud. This fraud will thereby make the other fellow workers in the group or team to doubt with each which will lead towards reducing reliability on each other and will raise concern regarding the decisions and the manner in which they work. Strategy to reduce it The fraud of such a stature can be reduced by taking proper steps which looks towards ensuring that private details pertaining to bank accounts, debit card information, credit card information, pin and passwords are not disclosed. This will also require that when a person uses a card to purchase online ensures that he has properly signed off and uses it in the presence of no one else (Chan, Fan, Prodromidis & Stolfo, 2009). Further, all care and precautions should be taken to ensure that no information is leaked and all information is protected. Case 2 Highlights of the case The case highlights the lack of supervision and differentiation of duties resulted in an employee clerk to misuse the funds for gambling purpose. The employee was in charge on managing the payroll clerk account which had $20,000 and she could order additional sum by signing when the amount went low. Since no check or supervision was there it resulted in the misuse of funds for other purposes apart from business and was diverted for her personal use in gambling. Type of Fraud This type of fraud occurs because of the lack of proper policies to govern and monitor the manner in which the money is utilized. Also, the in separation of duties and people being unaccountable due to the lack of process resulted in the fraud to be committed. The lack of supervision in monitoring the manner in which the money is being spent and the lack of easy availability of additional sum just by signing all alone results in getting easy money which can be used for purposes other than business. Manner in which fraud affects This type of fraud will have a bearing on the entire organization as it will raise concerns and doubts over the reliability of the organization. This will also reduce the believe that the management has on managers and will lead towards concentration of power and looking at every minute aspect with suspicion. This will increase the interference of the management in all decisions and will reduce the independence to take decisions in relation to small petty matters. The fraud has been such that the person committing the fraud will be sacked and will hamper his goodwill and opportunity to get a job elsewhere and will also impact the image of the organization. Strategy to reduce it This type of fraud can be reduced by having better supervision. Having people look into the manner in which the money is spent will curtail such acts. Further, if the management ensures that the books of accounts are audited regularly then all the expenses have to be notified and checked for reliability and accuracy which will help to reduce such acts. In addition to it the management should ensure that the amount for petty expenses is passed after getting signatures from more than 2 persons so that a check can be imposed (Kou, Lu, Sirwongwattana & Huang, 2004). This will make the person ensure that the misuse of funds are limited as the other person can ensure that the information regarding excess use of funds is passed to the upper level and the involvement of audit committee and accountant will reduce such acts. Case 3 Highlights of the case The case highlights that an accountant has committed fraud by forging a credit card in the name of another employee. The accountant even ensured that the expenses were based for an employee so that she couldn’t be suspected and further ensured that the expenses made were apportioned over different business expenses so that non one ever caught her which made the company loose millions. Type of Fraud This type of fraud occurred because of the misuse of power which the accountant had. The accountant had misused the power and manipulated the books of accounts to ensure that all the expenses made by her were covered in some or the other form. The lack of monitoring over the performance of the accountant can be another factor which had attributed towards such an act. Manner in which fraud affects The fraud will have an effect on the entire company as it will raise doubts whether the books of accounts of other parties have been correctly maintained. This makes the reputation of the company at stake. Further, it also raises concern regarding the job security of the accountant and goes against the degree which the accountant holds and might result in loosing the job and the cancellation her degree. Strategy to reduce it Such act can be reduced by ensuring that the books of accounts are audited after short intervals from people belonging to third parties and have no relation with the company. Further also looking towards monitoring the performance of the accountant and having proper supervision and monitoring on all the transaction will reduce it (Cahill, Chen Lambert, Pinheiro & Sun, 2002). Further, it should be made mandatory that all the expenses have to be backed with vouchers which should be verified to gauge the authenticity will help to reduce such incidents Case 4 Highlights of the case The case highlights that the management instead of looking into the paper which they signed believed on the employees and signed everything that was offered to them. This resulted in the employee purchasing airline tickets for himself and his family. This made the company loose $100,000 over 2 years and shows the manner in which the funds were misused for personal use. Type of Fraud Occur This type of fraud occurred because of the carefree attitude shown by the managers. The lack of interest shown by the manager in looking into the paper work gave the employee the required strength to commit such fraud. The indifferent attitude that the manager had and looked towards signing everything on the face of the thing without looking into the actual situation made such a fraud to occur and will result in affecting the brand name of all. Manner in which fraud affects This type of fraud has a bearing on both the employee who had committed the fraud and the manager who had signed the papers and helped the employee in committing such an act. The fact that the manner were indifferent and didn’t read the complete paper provided to them holds them equally responsible for such an act and needs to be dealt with severely. Further, it also raises concern regarding the brand image of the company. Strategy to reduce it Such acts can be controlled by ensuring that the managers look into the details before signing. If any material information occurs which creates doubt it should be verified and checked again to gauge the authenticity (Barse, Kvarnstrom &Jonsson, 2003). In addition to it the managers should be made aware of their responsibilities and it should be ensured that the management looks into every detail before signing the papers. Conclusion The paper thus highlights that different frauds which have occurred in different fields have occurred due to the loopholes and lack of effective monitoring practices. Developing a mechanism which improves supervision and looks towards increased monitoring will help to reduce such acts. Further, people caught in such acts should be punished severely and reforms and steps should be taken to reduce such acts in the future so that the business doesn’t have a bad brand name and ensures smooth day to day functioning. References Barse, E. L., Kvarnstrom, H., and Jonsson, E. 2003. Synthesizing test data for fraud detection systems. In ACSAC, pages 384–395. IEEE Computer Society. Cahill, M., Chen, F., Lambert, D., Pinheiro, J., and Sun, D. 2002. Detecting fraud in the real world. In Handbook of Massive Datasets, pages 911–930. Kluwer Academic Publishers. Chan, P., Fan, W., Prodromidis, A., and Stolfo, S. 2009. Distributed data mining in credit card fraud detection. IEEE Intelligent Systems, 14:67–74. Kou, Y., Lu, C.-T., Sirwongwattana, S., and Huang, Y.-P. 2004. Survey of fraud detection techniques. In Networking, Sensing and Control, 2004 IEEE International Conference on, volume 2, pages 749–754 Vol.2. Read More