Internal Fraud

The Global Fraud Survey not only provides information about different types of frauds schemes and characteristics of fraud perpetrators but also provide a deep insight into the red flags associated with it. According to Survey, Two thirds of frauds were committed by males, between the age of 31 and 45, and male perpetrators have caused twice the loss as compared to women perpetrators. According to the article, only 7% of fraud perpetrators had previously been convicted or charged with fraudulent activities. Same was the case with Albert Miano, who was a 35-year-old man and had never been convicted before, managed to forged endorsements on more than fifty checks totaling $1,057,000 over the course of four year. According to the survey, while the fraud going on, fraudsters sometime show certain behaviors or activities that can raise warning signals. In the case of Albert Miano, the three coincidental situations led to his fraudulent activities being discovered by his employer.
Coincidence One: Accordingly to the Survey, One of most common red flags displayed by perpetrators is excessive control issue (23% of cases). In this case study, Miano was the only responsible for collecting payment for invoices from accounts payable department, in addition, he was the only responsible for turning the invoices in to VP for approval as well. It is clear that the fraud has occurred due to lack of separation of duties in processing of invoices. According to the auditor, McGrane, “For any business transaction, the invoices should be dispatched independently to approving authority. Once signed, the approved invoices should be sent independently to accounts payable. When the check is prepared by accounts payable, they should mail it directly to the third party. Under a strong internal control system, the employees and/or contractors should not be allowed to come in and collect checks directly. Direct contacts with accounts payable personnel make it too tempting for someone