Examples of Fraud

Example 1

• On a warm day in early July 2011, a key member (“Jane”) of the executive team of X company sat in her office, preparing a routine travel expense reimbursement request form, attaching documentation in support of the costs of the air ticket portion of her planned trip, which she had purportedly booked recently and paid for using her personal credit card. After signing the form, Jane walked to the office of the Chief Financial Officer (“CFO”) to ask for his approval of the requested reimbursement. The CFO, who knew Jane well and had worked with her at a previous company, probably engaged in social conversation. He must have quickly glanced at the documents, not bothering to inspect them or review the total cost of the trip. The CFO initialed the form and gave it back to Jane who then went to see Alex, the accounts payable clerk with whom she had also worked at the prior company. She wanted Alex to process her travel expense reimbursement request and approve the wire transfer of $6,250 into her personal bank account. Alex, who also worked with Jane at the prior company, was only too happy to assist her with what he must have considered a routine task. It’s likely that he paid no attention to any of the details connected with the travel expense reimbursement request. Alex immediately initiated the wire transfer, filed the documents into Jane’s folder for her trip and then moved on to the rest of his busy day. Taken from http://www.markspaneth.com/publications/travel-expense-and-payroll-fraud-ca...

Example 2

• Assume that a manufacturing company makes a high volume of purchases from various vendors and then assume that one of the accounts payable clerks wants to make an unauthorized purchase and conceal it. Although there are various means to accomplish this, the clerk might charge the purchase to the wrong account to conceal the lack of authorization or record the purchase in the wrong period. For instance, if the company frequently purchases boxes of labels, the clerk might charge her purchase of home furnishings to the labels account to avoid raising questions about furniture purchases. Alternatively, the clerk might record the purchases of furniture to the furniture account in the next period if the company has already reached its budgeted amount for furniture in the current period.