Company owes the crook money!;

              Something new in defalcations —
The company owes
A MOST UNUSUAL IRREGULARITY came to light during a recent audit
of a finance company. It was discovered through the perseverance
of Kurt Pauly of our New York Office, the staff man assigned to
make the test of payroll transactions. These tests are conducted at the
home office of the company, a thousand miles from the branch where
the irregularity occurred.
The company involved has a central payroll operation based on
signed attendance and other reports from the branches. Because of
the high degree of internal control, our semi-annual payroll tests are
limited to one pay period and are made in 5 % of the total branches
and departments.
In checking the attendance sheet, Kurt Pauly found the signature
of a person at one branch whose name did not appear on the payroll
register. (This test is not made by the company—the attendance sheets
are only checked for overtime work.) On inquiring, Mr. Pauly was
informed that the person was undoubtedly a temporary employee
and therefore would be paid out of petty cash by the branch manager.
To check this explanation, Mr. Pauly examined the petty cash
vouchers, but these failed to disclose such payment. He then extended
his examination to attendance sheets and payroll registers of the
particular branch for several months prior and subsequent to the test
period. The same situation was found in all instances. Dissatisfied
with his findings, Mr. Pauly discussed the matter with the senior, Jack
26 THE QUARTERLY