Academic journal article Manager

In Suspicious Circumstances

Academic journal article Manager

In Suspicious Circumstances

Article excerpt

As we have seen recently, fraud most often hits the headlines when the people involved have a high profile; where the issues raised are complex; or when the amounts involved are huge. Ownermanaged business (OM Bs) will rarely be involved in this type of fraud.

However, frauds that do occur in OMBs are normally fairly simple and opportunistic and, whilst the amounts involved may not be on a headline-making scale, they are often significant enough to cause the business serious financial hardship, and even failure.

I was once instructed in a case that involved a bookkeeper who recorded herself (under a false identity) as a supplier to the business for whom she worked. She submitted invoices, which as part ofher job - she checked herself. She then paid herself mainly with cheques signed in advance by the directors.

When pre-signed cheques were not available, she simply presented a cheque to the directors without the payee line completed, claiming she would have to find out the correct name. She later completed the cheques with her own name.

The fraud was only discovered when the directors noticed a marked increase in costs and ordered an investigation. By then, the business was running at a loss and had a substantial bank overdraft.

In another case, a bookkeeper saw the opportunity to misappropriate cash received from customers. Although the business received cash and cheques, he only banked the cheques and kept the cash. To avoid detection, he recorded all amounts received from customers, including cash receipts, in the books but manually amended the total to the amount of cheques banked -- omitting any cash amounts from the total.

If a second person had been involved in the process, or the business's financial affairs had been carefully monitored, the fraud would have easily been detected. …

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