Dylan worked for a propane gas distributor as an accounting clerk in a small Midwestern town. Last winter, his brother Mike lost his job at the machine plant. By January, temperatures were sub-zero, and Mike had run out of money. Dylan saw that Mikes account was overdue, and he knew Mike needed another delivery to heat his home. He decided to credit Mikes account and debit the balance to the parts inventory because he knew the parts manager, the owners son, was incompetent and would never notice the extra entry. Months went by, and Dylan repeated the process until an auditor ran across the charges by chance. When the owner fired Dylan, he said, If you had only come to me and told me about Mikes situation, we could have worked something out.

Requirements

What can a business like this do to prevent employee fraud of this kind?

What effect would Dylans actions have on the balance sheet? The income statement?

How much discretion does a business have with regard to accommodating hardship situations?