How to Prevent Fraud

982 Words2 Pages

Damages done by the fraud to any organization can be huge if not prevented. The main role of internal auditors in an organization is the detection and then prevention of fraudulent activity that is why the organizations are paying for them. Some fraud activities have happened in the Ajax Export Corporation. The fraud is done by accounts payable clerk with a quantity of $18,000 by writing checks to herself and charging the expense to miscellaneous account/ expense. This process according to the examination has occurred over the period of three years. The issues which are addressed may have the following recommendations. Recommendations for fraud prevention: Issue 1: Ineffectiveness of internal controls due to recent downsizing Recommendation: Since the company is busy in the downsizing, it seems that effective internal controls are not in place and therefore it is recommended that there should be written policy regarding the implementation of internal controls by the employees. This trend should be set by the management from top to bottom so that every employee must be aware of its role. Issue 2: Morale has declined substantially due to the downsizing Recommendation: Since every employee is afraid of the security issue regarding the job so their morale is down as they are experiencing downsizing in their organization so they might feel that they would b the next. In this situation it is recommended that internal audit department should perform its function regarding the building of confidence of employees and make sure that proper awareness has been spread between the employees that this downsizing is a strategy of reducing the cost and need not to worry for the employees who is working with honesty and integrity. Is... ... middle of paper ... ...duties. Additionally, recovery of $18,000 from the clerk should be done and dismiss the accounts payable clerk at the earliest. Conclusion: Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.

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