Question

You are an internal accountant in a regional chain of restaurants. You have just uncovered a massive purchasing fraud scheme involving two of your purchasing managers. The CEO is very angry with you because the entire company just passed an audit done by an accounting firm that you recommended. How do you respond?

Answer 1

The response from internal accountant to the CEO is as under
• The scope of accounting firm for the audit is to check whether standard operating procedures are defined and followed for each department and give a red flag for further investigations
• In case of purchase department the SOP for purchasing are defined and followed
• The accounting firm has given red flag on purchase prices which was to further investigated and a indicator for fraud detection and prevention
• The red flag can be fraud indicator which can be correct or wrong on further detailed investigation
• The internal accountant took action on the fraud indicator and further investigation has resulted in deducting the fraud as it requires time and resources for further investigation
• The red flag by accounting firm has helped in deducting the fraud and should be communicated effectively to the CEO