short case

Case 8. Stronger internal controls would have prevented the fraud. However, internal controls are costly in a small firm. If Mary had taken a more active role in vendor management and required her signature on contract approvals, the fraud could have been prevented. She could have also informed vendors that kickbacks and bribes are not acceptable. Even though this is a small firm, a more active role needed to be taken in monitoring employees. Mary could have established a formal code of ethics and had each employee sign it. There are a few basic things that every small business owner should do, including: signing all checks (this would have allowed her to see payments going to favored vendors), opening the bank statement, depositing all cash, and reviewing periodically all vendors and the amount of services they are providing