1) The Committee of Sponsoring Organizations of the Treadway Commissions (COSO) declared in 2011 that keeping a moral tone is an effective way for organizations to prevent fraud. The values, integrity and competence of the company’s leaders and the presence of a positive management philosophy encourage low-level employees to be honest and morally upright (COSO, 2011). When employees observe that executives behave unethically, they become more likely to engage in fraudulent behavior because they see that it is tolerated. Mogel’s Inc. could establish control through a code of conduct covering all employees. The presence of formal policies can only be effective when it is properly and ...view middle of the document...
This would thwart a common lapping scheme where money from one account is filed under a different account to cover up discrepancies in records (Wells, 2010).
4) An automated positive pay system is also helpful in preventing fraudulent schemes (McNeal, 2011). In a positive pay system Mogel’s Inc. would forward a list of electronic payments and checks issued every day to their bank. The bank will match all transactions of payment against those provided on the list. Transactions which do not match the given list would be sent back to the company for verification and this would alert Mogel’s Inc. of possibly fraudulent payments before the bank clears the release of funds (McNeal, 2011).
5) Mandated vacation days for employees are another good way to prevent skimming schemes because these operations require careful monitoring and vigilance on the part of the perpetrator (Wells, 2010). If all employees were required to go on holidays and temporarily leave their post or have someone take over the job, then skimming operations could quickly surface because someone could detect that accounts and records are amiss.
6) Supervisory approval for giving discounts or account write-offs is another thing that Mogel’s Inc. can do to prevent future fraudulent actions (Wells, 2010). Faking discounts and write-offs are an easy way to steal money without being noticed, but if the employee who receives and records payments has no authority to make such adjustments then this fraudulent situation is avoided entirely.
7) The Association of Certified Fraud Examiners (ACFE) 2010 Report to the Nations on Occupational Fraud and Abuse, lists that at least 40% of fraudulent actions are discovered because of employees who speak out. Most of these tips are given through a hotline. In fact, a fraud hotline was found to be three times more effective than any other fraud detection technique in an organization where employees are well informed about the organization’s processes (McNeal, 2011). A hotline also has a preventive effect because it provides all employees an easy way to report suspicious activity.
8) The presence of auditors is another way for a company to monitor fraudulent activities. Auditors who are trained to see simple red flags such as physically altered lists and books or technical red flags like suspicious increases or decreases in returns, discounts, adjustments and write offs would catch any attempts of fraud early (Wells, 2010). Mogel’s Inc. will also benefit if the auditors of its parent company in Delaware would fact-check and run analysis software on the records and reports...