Shortages and how to cover them;

              2 HASKINS & SELLS January
ARGUMENT has been advanced on
various occasions against the pub­lication
of data relating to the perpetra­tion
of fraud. This argument is based on
the theory that the publication of such
information might suggest wrong-doing
to someone who otherwise would not have
thought of that possibility.
Another argument has been that the
knowledge of how irregularities are per­petrated
and covered is a part of a cer­tified
public accountant's stock-in-trade
and therefore it should not be made public.
These arguments and any others like
them fall precipitately in the face of a
demand that no effort be spared to check
the widespread crime-wave that threatens
to undermine the business structure of
the country. It is not enough that ac­countants
understand how fraud is com­mitted
and concealed, and how it may be
detected. It will not suffice for account­ants
to exercise their keenest skill and
constant vigilance in bringing to light the
evil machinations of dishonest individuals
in business. The cooperation of every
honest individual, who has it in his power
to help, is needed. To make this co­öperation
effective, wider distribution of
knowledge is needed as to the nefarious
schemes employed in stealing and covering
the thefts.
The instalment business, whether eco­nomically
a blessing or a curse, offers a
fertile field for the practices of the busi­ness
underworld. This is due to the fact
that the volume of business in a given case
generally is large, the method of payment
requires an infinitude of entries, loose-leaf
records are the only practicable means of
handling the accounts, and the detection
of any irregularities involves an amount
of detail work distasteful to contemplate.
Systems of internal control and check
whereby a proper division of labor is at­tained
offer an effective means of prevent­ing
and detecting irregularities in the in­stalment
field as well as in other fields.
But to make a system effective someone
dependable and not an operative under
the system must ascertain at frequent
intervals that the system is being carried
out as planned, and that each individual
is performing only the task to which he is
assigned. Further, it is of paramount im­portance
that the individual operating the
controls should have no opportunity of
handling any funds.
A case in which large embezzlements
and ramified collusions were involved was
Shortages and How to Cover Them