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How To Prevent Fraud Essay

1059 words - 4 pages

Damages done by the fraud to any organization can be huge if not prevented. The main role of internal auditors in an organization is the detection and then prevention of fraudulent activity that is why the organizations are paying for them. Some fraud activities have happened in the Ajax Export Corporation. The fraud is done by accounts payable clerk with a quantity of $18,000 by writing checks to herself and charging the expense to miscellaneous account/ expense. This process according to the examination has occurred over the period of three years. The issues which are addressed may have the following recommendations.
Recommendations for fraud prevention:
Issue 1:
Ineffectiveness of internal controls due to recent downsizing
Since the company is busy in the downsizing, it seems that effective internal controls are not in place and therefore it is recommended that there should be written policy regarding the implementation of internal controls by the employees. This trend should be set by the management from top to bottom so that every employee must be aware of its role.
Issue 2:
Morale has declined substantially due to the downsizing
Since every employee is afraid of the security issue regarding the job so their morale is down as they are experiencing downsizing in their organization so they might feel that they would b the next. In this situation it is recommended that internal audit department should perform its function regarding the building of confidence of employees and make sure that proper awareness has been spread between the employees that this downsizing is a strategy of reducing the cost and need not to worry for the employees who is working with honesty and integrity.
Issue 3:
No increase in salary for last two years
Since there is no increase in salary for last two years which may frustrate the employees, in this situation it is suggested not to overburden the employees with the extra work. Duty of every employee should be assigned in advance and there should be clear plan of work for each employee. Also management makes it sure to increase the salary as soon as possible with the whispers of rumors of increment in the salary.

Issue 4:
Office manager was the accounts payable clerk previously
There is no proper segregation of duties and it is suggested that proper control regarding the segregation of duties should be implemented in the company. Proper hierarchy with proper designation should be assigned to the employees up on the basis of qualification and experience.
Issue 5:
No negligence in duty but no proper internal controls were established
As can be seen in issue 4 and issue there was a clear lack of internal control implementation by the management. Therefore it is suggested for this issue that there should be proper implementation of internal controls with the standard operating procedures which should be...

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