Question

Q) Payroll Fraud:

John Smith worked in the stockyard of a large building supply company. One day he unexpectedly left for California, never to return. His foreman seized the opportunity to continue to submit time cards for John to the payroll department. Each week, as part of his normal duties, the foreman received the employee paychecks from payroll and distributed them to the workers on his shift. Because John was not present to collect his paycheck, the foreman forged John’s name and cashed it.

(Required)

Describe two control techniques to prevent or detect this fraud scheme.

Answer 1

Payroll Frauds are hard to detect as employees work for the organisation, they try to hide those frauds permanently.The risk of detecting these will be much higher in case of large organisations.

Control Techniques to prevent or detect Payroll Fraud Scheme :

1. Always "Rotate the Duty of distributing paychecks" among the employees.So that next time when an another person if left with the John's name paycheck may inform the management about it.

2. Some times do surprise visit of employees having their name in payroll department.

3. Don't make any cash payments, because it becomes difficult to track them (like who are actually receiving them).