A fraud occurred at Seattle Children's involving the former Controller. The Seattle children's previous controller diverted $96000. Auditors didn't find out about this until the controller actually bragged about it. And this was completely a fraud. He took advantage of some of the weaknesses in the system, especially with vendor setup. There was a weak new vendor setup and approval procedures. Also, lack of system controls put in place to enforce authorization limits and segregation duties. He was the requestor and treasurer for his church. They were building a new church in the retina area. He found a way to get the vendors paid through Seattle children. The problem was that he brought a new vendor into the system and the system didn't require any approval. Also, he was able to pressure the account payables department to hurry up. As a result, 40,000 checks were delivered for funds.

Q: How was the Controller able to execute this fraud? What was missing that could have stopped this or made this harder for him?

Q: Why are controls so important to the management of any company? Why are they important in the financial auditing process?