Fraud and internal control;

              Bulletin HASKINS & SELLS 5
Fraud and Internal Control
DESPITE the efforts of legislators,
government and corporation officials,
and accountants, fraud and embezzle­ment
schemes continue to grow and even
to flourish in infinite variety. The in­crease
in number has been accompanied by
more ingenious and diabolical methods of
effecting and concealing the misappropria­tions.
It is obvious that the business
world must establish every possible safe­guard
to protect itself against these nefari­ous
schemes. Public accountants can do
much to curb these manipulations. How­ever,
to control fraud most effectively, the
business man must help protect himself
by using a good system of internal control
for his organization, and having public
accountants determine at frequent inter­vals
whether the system is effectual.
Most embezzlements within a business
organization have been committed by an
employe who has had access to the com­pany's
cash. Consequently, systems of
internal control within some companies
have been designed to give particular atten­tion
to the employes connected with the
cash situation, but have failed to take
other employes and their duties into con­sideration.
Recently, however, a case has
come to light in which an employe who had
no access to cash was able to defraud the
company of about $70,000 through a
scheme, crafty and daring in its com­pleteness.
The company's warehouse was in a
different city from that in which the pur­chasing
department and general offices
were situated. The purchasing depart-