Guide to Preventing Workplace Fraud - Chubb Group of Insurance ...

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Segregation of duties may be difficult to achieve in smaller businesses where sufficient staff may not be available to handle separate task assignments. In these cases, businesses may need to rely on other controls, such as closer oversight by owners and managers, more frequent reconciliations and account balance confirmations and, if possible, more frequent rotation of financial assignments. 24
COMMON FRAUD SCHEMES This section offers illustrations of common fraud schemes for consideration in assessing your business risks. All names are fictitious and not intended to be or imply real persons or companies. Vendor Schemes Payments to outside vendors represent a significant outflow of funds for most companies. Therefore, it is important to understand vendor fraud risks. Vendor Management Toni, a human resources manager for ABC Company, has authority over an annual training budget of $3.5 million. She routinely contracts with new vendors for training programs and approves payments to those vendors. Toni asks Accounts Payable to establish a new vendor account for “XYZ Consulting Services” and authorizes payments to XYZ amounting to $300,000 over a six-month period. A subsequent inquiry about XYZ results in discovery that: • XYZ Consulting Services is a shell vendor operating out of a mail drop address. Toni is the only person associated with XYZ Consulting Services. • XYZ Consulting Services never provided goods or services of any kind to ABC Company. The invoices provided to Accounts Payable by Toni were never challenged, even though the service description was vague and no service agreement, nor any other documentation, was present in the company files. “Ghost” vendors represent a common fraud device used by company insiders who have the abilities to approve new vendors to receive payments and to authorize such payments. In these types of schemes, a dishonest employee may establish a phony vendor account(s) that he or she controls and then direct fraudulent payments to that account(s). 25
Page 1 and 2: Guide to Preventing Workplace Fraud
Page 3: GUIDE TO PREVENTING WORKPLACE FRAUD
Page 7: CONTENTS Introduction .............
Page 10 and 11: focus on prevention, detection, and
Page 12 and 13: The Fraud Triangle What motivates p
Page 14 and 15: ■ Minimization: “I’m not taki
Page 16 and 17: Cash-diversion schemes range from s
Page 18 and 19: FRAUD RISK MANAGEMENT- LOSS CONTROL
Page 20 and 21: General fraud detection practices.
Page 22 and 23: ■ “Vendor audits,” which typi
Page 24 and 25: company. Checks with identified inc
Page 26 and 27: ■ Investigate Forms W-2 and 1099,
Page 30 and 31: In many companies, vendor payments
Page 32 and 33: ■ “Vendor audits,” which typi
Page 34 and 35: The above scenario presents a numbe
Page 36 and 37: part of computerized records and ar
Page 38 and 39: software, and color laser printers
Page 40 and 41: Misappropriation of Waste, Scrap, a
Page 42 and 43: Expense Account Reimbursement Fraud
Page 44 and 45: Payroll fraud may involve collusion
Page 46 and 47: ■ Employee correspondence sent to
Page 48 and 49: ■ Design and implement safeguards
Page 50 and 51: ■ Foster a strong “perception o
Page 52 and 53: Many companies require that employe
Page 54 and 55: ■ Callers are asked to call back
Page 56 and 57: ABOUT THIS BOOKLET This booklet was
Page 60: Chubb Group of Insurance Companies

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