Fraud at Furniture World: How to Avoid Getting Scammed

Qn. 1 

Elizabeth Pine, who was the payroll clerk at Furniture World, was under pressure following her divorce. She suddenly needed more money to pay her bills. This was the first component of perceived pressure or motive. She saw an opportunity on the payroll, and so she decided to create fictitious employees so that she could earn more money. This was the second component of perceived opportunity. Her rationale was probably supported by the fact that her children needed support and her credit card debt was high. She was also a trusted employee who deserved some perks, so her chances of being caught were low. This was the third component of rationalization which led Pine to start and continue this crime. These elements enabled the fraud. 

Qn. 2 

The significant risk factors that allowed this fraud to occur was trust and problems resulting from personal failure. She had worked there for 15 years without blemish or any record of wrongdoing on her part. So it was easy to overlook her when looking for possible culprits of criminal activity. Pine had been a trusted employee, but she had a non-sharable financial pressure of debt as a result of divorce. This was the easiest way for her to solve her problem without shame. Her act was a demonstration of violations of ascribed obligations. It was also vital for her to solve her problem in secret. Her high credit card debt was also a factor that contributed to her committing this fraud (Huang et al., 2017). 

Qn.3 

This case could be attributed to external economic pressures. Her finances were in ruin, and she had no easy option to recover. Furthermore, her age and extensive work experience placed her in a higher position with additional financial responsibilities. This is backed up by the Hollinger and Clark assertions that points to the position as directly related to theft. The last contributor to the fraud was the employee perception of control. Pine had worked in the company for long, so she was familiar with their systems. She knew that the company was unlikely to catch her in the process of her crime. She was solely responsible for the payroll, and this placed her in a position of authority and control. Had the company set up better mechanisms to detect fraud, then Pine would have been deterred from even trying (Kranacher et al., 2010). 

Qn.4 

The management of Furniture World was right to perform an internal audit. This is the first step they took in discovering whether all was well in the company. Because the accounts with suspicious activity were controlled by one person, it would have been impossible to uncover a fraud without the audit. The other thing they did right was to involve the police when the internal auditor could not ascertain the cause of the problem. This was a better move than trying to deal with the problem internally because the culprit would have a chance to escape or commit more cases of fraud. It was also smart to keep the staff in the dark after the result of the audit was out (Boyle et al., 2015). 

Qn. 5 

Mechanisms should have been put in place to ensure that accounts were controlled by more than one person. This would prevent the chance of a person secretly committing fraud while undetected. The payroll should also have been regularly updated in conjunction with the HR department and the heads of every division. The company was careless in entrusting Pine alone with the compilation of payroll without the involvement of another staff member. The internal audit would also have been performed annually to avoid a crisis or fraud incident proceeding over more than one financial year. Minor quarterly reviews could also have benefited the company. Finally, systems that monitor the internal operations should have been able to detect fake employees (West & Bhattacharya, 2016). 

References 

Boyle, D. M., Boyle, J. F., " Mahoney, D. P. (2015). Avoiding the fraud mindset. Strategic Finance, 96 (8), 41-47. 

Huang, S. Y., Lin, C. C., Chiu, A. A., " Yen, D. C. (2017). Fraud detection using fraud triangle risk factors. Information Systems Frontiers, 19 (6), 1343-1356. 

Kranacher, M. J., Riley, R., " Wells, J. T. (2010). Forensic accounting and fraud examination. John Wiley " Sons. 

West, J., " Bhattacharya, M. (2016). Intelligent financial fraud detection: a comprehensive review. Computers "Security, 57, 47-66.