As is the case for every sector, retail sector is subject to the risks and fraud in the procurement cycle. This makes up the second highest occurring type of economic crime (PwC, 2014., p 38). Coenen (2008 p. 86) describes procurement fraud as the manipulation of the procurement cycle with the aim of gaining an unfair advantage in the process of bidding and proposal. This process is dominant in the retail sector as the selection of vendors and assessment of the relationship is a process which is central to the functioning of a retail enterprise. The reluctance to admit to violation of fiduciary responsibilities to employers by employees makes it difficult to admit this kind of fraud and especially because it normally occurs in an external setting
It is imperative for establishments to have robust controls in processes to avoid operational frauds resulting from employee embezzlement. Albrecht et al. (2012) defines this kind of fraud as a result of employee deception by taking into their possession company assets. Cases of employee embezzlement (PwC India, 2012) include revenue leakage resulting from underpricing of products without bar code / pilferage of such products: Bar code frauds such as forged bar code labels; siphoning of discount coupons, promotional items by employees; Deliberate un-optimized inventories maintained at stores; Expense fraud resulting from fraudulent cash register disbursements; Deliberate inaccuracy in supervision and administration at retail outlets, departmental stores and supermarkets and; Tampering of IT systems for procurement, warehousing, inventory management or sales; more so considering the vast distribution network that retail companies operate in. These are normally direct ways company’s resources get into the custody of individuals without third party
(2011 p.11) describes customer fraud occurring either when customers do not pay for goods purchased or get nothing in return. Example of such fraud is what PwC India report refers to as Return Fraud. This kind of fraud is more common with retail sector and companies should pay special attention to high shrinkage rate, dramatic increase in number of returns, return policy not being enforced and increasing number of markdowns due to returns. Return fraud may take various forms such as the return of stolen merchandise; the subsequent resale of stolen merchandise in grey markets; Return of used merchandise, outside of return policy; Product exchanges, that is when a consumer comes to exchange a product which has not been purchased from the store. This is especially visible for high-value merchandise such as apparel; return of merchandise using counterfeit receipts. It is essential to look at such fraud-related schemes. Another of such retail fraud scheme is online retail and credit card fraud directly linked with identity theft. E-commerce, online retail sales have had significant increase over the years accounting for almost one third of the top 50 retail companies (Deloitte, 2014). As the name implies identity theft occurs when another person takes up the identity of another to purchase goods or engage in criminal activity or perpetrate fraud (Albrecht et al., 2011 p- 531). With the high level of usage of credit card transactions, retail companies faces the
I believe that asset misappropriation by accounts payable fraud is occurring at Wayland Manufacturing Company due to a lack of proper internal controls. Making the company’s Chief Accountant responsible for additional day-to-day functions provides him with opportunity to commit by creating fictitious vendors with his information and then creating fictitious invoices. Newbaker can then conceal his fraud by approving the invoices for payment. Employees working at an organization for more than five years are more likely to commit fraud. Therefore, Newbaker’s six-year history with the company has made him trustworthy and very knowledgeable, which could indicate involvement in asset misappropriation. The high employee turnover could represent a past fraudster leaving before getting caught or employees refusing to continue with the asset misappropriation. In addition, the varying monthly accounts payable transactions ranging from the lowest being April 2014 and
When it comes to the audit objectives, the public and the auditing profession maintain varying expectations. The public expects the prevention of fraud to be the auditor’s responsibility. However, the auditors believe that they are responsible for fraud detection, but not obliged to find all of it. In addition, the public views the fraud by the characteristics displayed by management and employees. For example, WoolEx Mills’ management wanted to exude a prevailing financial position and to uphold reputations. By committing financial statement fraud, it made the company look successful even though Sales and cash flows were decreasing. The public would view these particular characteristics as pressures to why the company committed fraud. Greed, recognition, and influences also impacted the public’s view of Wool Ex Mills’ fraud scheme. The CEO used authority to influence employees to take part in the fraud scheme. The public would see that the CEO utilized power to manipulate shareholders, which impacted their trust with WoolEx Mills (Cohen, Ding, Lesage, & Stolowy 2015) (Krishnan & Shah
Ulinski, Michael. "AN ANALYSIS OF SMALL COMPANY FRAUDS AND." American Society of Behavioral Society. Dept of Business, Pace University. 05 Feb. 2008.
In an industry where a 1% change in gross margin can mean millions of dollars, retailers have begun focusing greater energy on mitigating losses caused by employee theft. Employee theft has become a problem of increasing significance for retail organizations over the past few decades. In 2004, the European Theft Barometer report showed an increasing prevalence of employee theft in retail organizations, up 1% from 2003 (Technology Tackles Employee Theft, 2005). It’s been estimated that “the outcome of employee deviance and delinquency accounted for between $6 and $200 billion of organizational loss annually” (Lau, Au, & Ho, 2003). Employee theft can be loosely defined as any behavior by an employee of an entity that is intended to produce detrimental financial outcomes for the employer. This includes pocketing cash, stealing inventory, using company resources for personal gain, and other deceptive tactics. Most modern day retailers are at some level of risk as motivation and opportunity make theft an attractive choice for many employees. While large organizations have focused on this problem for several years, many small businesses have not devoted the time and resources to addressing this problem. Small businesses may be at particular risk due to a lack of high-tech internal controls that larger organizations may have. Additionally, small businesses often “frequently deal in cash – the easiest temptation of all to a dishonest worker” (Biddick, 2004). Consequently, small businesses must pay special attention to this problem in hopes of diminishing the risk (Biddick, 2004).
Also, around 5,300 employees were found to be involved in the scheme over a period of 5 years. In this case, if the defendant is liable, how should they be prosecuted for their fraud? Aggressive sales goals push employees to break the rules. “On average, 1 percent of employees have not done the right thing, and we terminated them.
Today, worldwide, there are several thousands of crimes being committed. Some don’t necessarily require a lethal weapon but are associated with various types of sophisticated fraud, this also known as a white-collar crime. These crimes involve a few different methods that take place within a business setting. While ethical business practices add money to the bottom line, unethical practices are ultimately leading to business failure and impacting the U.S. financially.
The primary use of stolen identities is for credit card fraud which can occur by an offender placing charges on a victim’s existing cards or by opening new accounts in his or her name. A common activity for these fraudsters is to change the billin...
Identity theft is the stealing and use of someone’s personal information and is one of the fastest growing crimes in the nation (Dole, 2005). According to Federal Trade Commission estimates, identity thieves victimize approximately 10 million Americans every year at a cost of an astonishing $50 billion (2005). Identity theft has been going on for years now and is easily done with the help of today’s technology. According to the Federal Trade Commission, there are six common ways that identity thieves get a hold of personal information. The varieties of methods that are used are dumpster diving, skimming, phishing, changing the victim’s address, stealing, and pretexting (Federal Trade Commission). Once someone’s identity is stolen, accounts can be opened in the victim’s name such as credit cards, loan, and utilities; money can be withdrawn from the victim’s bank accounts and cause financial difficulties or the victim’s personal information may be used for other reasons. While consumers blame credit card companies and credit bureaus for lack of security, credit card companies blame consumers for being too gullible and forthcoming with private information (Shelly, 2010). While the two disagree who is at fault, they both share a deep concern over identity theft. Credit card companies’ refusal to accept that technology is moving too fast for them to keep up and their lack of security with existing accounts provides evidence that it is not the consumer’s fault that identity theft is one of the fastest growing crimes in the nation (Dole, 2005).
Embezzlement has become more common in the last few years. No one knows for sure whether the problem has increased due to the bad economy, less ethical behavior among employees or other attitudes toward the government or businesses in general. Charleston, South Carolina is no exception to the rising number of fraud cases. Every year more cases are being discovered and exposed to the public. One such case is the embezzlement of cash from a county owned garage. The embezzlement case of Martina Moultrie Richardson will be discussed as well as types of evidence desired in this case, methods/procedures for gathering the evidence and procedures for cataloging and maintaining the evidence.
Several acts of unethical behavior by upper-level Management large organizations have made it very difficult to know who to trust with your money. Especially, when our government officials did not act with normal citizens in mind. Both, the company 's and our government officials are driven by the need for money. However, businesses continue to lose investors and taxpayers’ money. As recently as, 2015, large companies have lost investors finances, due to bad decisions or
The Hollate Manufacturing case provided by Anti-Fraud Collaboration has well illustrated how several common issues in an organization contributed to the fraud’s occurrence. These issues can be categorized into two major groups: ethical culture (internal aspect) and internal control system (external aspect). By taking effective actions to enhance these two aspects, an organization can protect itself against the largest frauds, which result in financial and reputational damage.
Why is the United States not up to date with Europe in issuing safer credit and debit card transactions? Europe has had the chip and pin credit and debit cards since the year 2004. These new security chip cards started to become a trend in the year 2014 in the United States. The United States has over ten million credit card terminals so it was hard to get such a large market to adopt to a new type of technology. There are three sectors of the market that had to work together which were the retailers, big financial institutions, and then the card associations like Visa or MasterCard. Retailers and credit card companies could never decide who would pay the transaction fees so there was another conflict that slowed the process of implementing
Fraud was the main problem that arose when identity theft happened to an individual. The common identity theft frauds were credit card frauds, utility frauds, and frauds that usually involved banks. According to the article Identity Theft (2014), it mentioned that “Credit card fraud is one of the most common means of identity theft, accounting for about two-thirds of U.S. cases” (Para. 5). Credit card frauds usually occurred at online stores websites requesting for credit card information or devices utilized by retail store employers acquired information from the magnetic strip on the credit card. Utility frauds transpired through the access of an unsecured or unlocked mailboxes. Many utility statements had account numbers and provided online access to thefts to order unwanted products or services. Individuals had to be careful where and when to use credit cards and what time to present their personal information.
Financial: A corrupt company will lose customer respect and trust, requiring that the company’s management spend valuable time and resources to keep their clientele loyal and demonstrate that they still operate a viable business. The public, overa...
According to the IC3, in 2008, they received 275,284 complaints. Compared to the 2007 complaints, there were 33.1% more complaints. The majority of the complaints filed were related to both fraudulent and non-fraudulent issues on the Internet. The crimes reported consisted of non-delivery of merchandise and/or payment which was 32.9%, auction fraud represented 25.5% of the complaints, credit and debit card fraud represented 9.0% of complaints, Confidence fraud, computer fraud, and check f...