As a auditor, I was assigned to a team to audit possible payroll fraud. The company we were auditing always handed the Friday payroll checks to the department supervisor to disburse. On this visit it was my responsibility to gather a signatures, verify the employee ID to the payroll register for the shipping/warehouse department. Paychecks were always presented at 9AM, so the employees were there to pick them up as we were told.

This one department always had a high turnover rate. On this Friday I was in the warehouse managers office ready to go. One by one the drivers and warehouse personnel came in with ID and signed for their checks. At the end of the time period there were three checks leftover. The warehouse manager said three employees were out doing deliveries. I said have them see me when they come back, I will be here all day (10 hours).

Question:

1. Identify one way that the warehouse manager could defraud the company under the present system.

2. Discuss a control feature that the company can use to safeguard against fraud.

In addition, there is a 200 word minimum for your initial post.