Case 1

Jacob Kent is the general manager of a large locally-owned garden center in Columbus. The store has four departments, each with its own department manager.

Each department has its own sales counter, and two salespersons are assigned to each counter. The salesperson enters his or her own PIN for each transaction. At the end of the day, the manager in each department totals the departments sales, retrieves the cash and checks from the register, and prepares a deposit slip for the general manager to review and sign. The general manager re-checks the cash count and then signs the deposit slips and accounting documents.

When the general manager receives the cash receipts from all departments, he prepares a sales report and sends it to the stores controller. The controller counts the money and signs three copies of the sales report. One copy is for her, one copy goes to the store accountant, and the final copy goes to the store manager. The controller then puts all the cash into the safe until it is picked up for delivery to the bank.

The store accountant reconciles copies of sales reports with bank deposit slips and the bank statement.

Jacob has a long relationship with the bank. The bank just called to suggest that he checks into some customers' checks that had recently been returned for non-sufficient funds. According to the bank, some of the payers had written bad checks to other local businesses.

The bank suggested that the garden center may have an employee working against it. A police investigator told the bank that in similar cases an insider is involved.

1. What possible check fraud schemes might the company be a victim of? What control processes could be implemented to detect and deter them?
2. Given the stores procedures for processing cash receipts, which store employees might be in a position to participate in a check fraud scheme?