In a California smart phone app company an employee discovered a flaw in the accounting system. The accounts payable clerk found she was able to change the names of vendors in the computer system to her name. She would create false invoices and create a cheque for the false invoice. The name on the cheque was changed to the name of the employee. After the cheque was printed, the name in the system could then be changed back to the appropriate vendor. The cheque register would show only the name of the vendor. The fraudulent employee had authorisation to sign cheques under $2,000. By writing small cheques, he was able to defraud the company of $90,000. An employee of another department was looking through the vendor list on her computer after the fraudulent employee had changed the vendor name to his name. A few entries later, the vendor name changed again. She wondered how this switch could occur and asked her supervisor. Soon after, the fraudulent employee was caught.

Required:

A. What kind of fraud is being committed – financial statement or misappropriation of assets?  Discuss.

B. Discuss four safeguards that might have prevented this fraud.