During the past year, your company has discovered three major frauds. The first was a $3.9 million theft of inventory that had been going on for six years. The second was a $2.8 million kickback scheme involving the most senior purchasing agent. She had been allowing certain customers to overcharge for products in return for personal payments and other financial favors. The third was an overstatement of receivables and inventories by a subsidiary manager to enhance reported earnings. Without the overstatement, his units profit would have fallen far short of budget. The amount of overstatement has yet to be determined. All three of these frauds have been reported in the financial newspapers and have been embarrassing to the company.
In response to these incidents, the board of directors has demanded that management take “positive steps to eliminate future fraud occurrences.” In their words, they are “sick and tired of significant hits to the bottom line and negative exposure in the press.” The responsibility to develop a program to eradicate fraud has fallen on your shoulders. You are to prepare a comprehensive plan to prevent future frauds. In devising your strategy, explain the roles the following groups will play in preventing fraud:
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