Question

Two years ago, your best friend Scott Adams started a home business selling custom-made chairs and tables. His original designs quickly became popular, and he began selling in large quantities. To take advantage of the upcoming holiday season, Scott decided to begin selling over the Internet. He contacted a Web page designer and is now ready to go live with the site. Although he is familiar with the gist of Internet retailing, Scott is concerned about the possibility of fraud involving false online purchases where perpetrators impersonate customers and place orders. Knowing about your background in fraud, he asks you how to prevent and detect fraud in his new venture.

1. List three fraud schemes that Scott should be concerned about.

2. Identify the steps Scott should take to prevent and/or detect each scheme.

Answer 1

Answer for 1)

1)Here,the perpetrators may order customised chairs and tables for unknown address and hence the material would be wasted,delivery costs and holding costs of tables and chairs would be wasted.

2)Order are placed and after sometimes the order may be cancelled which will result is loss of cost incurred upto that point.

3)The persons who purchased on after recieving the orders may not pay the price.

Answer for 2)

1)Scott must collect advance at the time of order which discourages those who place orders fraudulentlu.

2)At the time of cancellation of the order advance must be retained either partially or totally based on the completion of work.

3)Scott must collect bank details and other address of the debtors who buy goods on credit .