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-