Question 1: Case Study

A suburban construction company employed several hundred laborers at any given time. With a lean operation, the home office include a one-person accounting department, with a long serving bookkeeper/ controller who coordinated the weekly payroll, printed the payroll checks, placed the owner's mechanical signature on the checks, hand-delivered the checks to the job sites and reconciled the company's bank account.

It came as no surprise then that, after several years, it was discovered that the bookkeeper had perpetrated a scheme whereby she kept several laborers on the payroll after they had left the company and was using these to carry out some fraudulent activities. After the investigations, the company received $500,000 as recovery of damages from its fidelity bond carrier.

Question:

1. Identify the type of fraud.

1. How do you think the book-keeper would benefit from such a fraud identified in (a) above or the fraudulent activities that must have been undertaken by the bookkeeper.

1. How do you think such a fraud can be identified?