Free «Billing Scheme Case» Essay Sample

Measures that could have been taken to prevent the fraud committed by Albert Miano or detect it earlier?

For a better understanding of the measures that could have been taken to prevent this fraud, it is necessary to identify various weaknesses of the firm that facilitated the fraud. First, Miano was given a chance to personally collect the approved invoices and deliver them to the accounts payable department. The second mistake is that the same employee was granted an opportunity to transport the invoices to the accounts payable department and to be the one collecting the checks. The scam was also successful due to a lapse in the internal controls of the company. Finally, there was reluctance among employees to follow standard accounting procedures.

The fraud would have been prevented by setting up appropriate internal controls that would have governed all transactions that employees were involved in (DiNapoli, 2010). For example, Miano’s transactions should have been well managed by independently dispatching the payment invoices to the approving authorities. Bulk dispatch of the invoices presented a challenge for the authorities to conduct a proper scrutiny on the invoices to detect any forgeries (DiNapoli, 2010).

After signing the invoices, they should have been sent independently to the accounts payable department. Such step would also give the department an opportunity to scrutinize the invoices and act on them independently (DiNapoli, 2010).

The accounts payable department should have not given Miano a chance to come into contact with the payment checks. The checks should have been mailed directly to the third party so that the payment is more prompt and effective. Direct payment would limit chances of fraud as Miano would not have had a chance to tamper with the checks.

The payment invoices presented to the accounts payable department should have been combined into a single check. Writing a different check for each invoice enabled Miano’s to false checks to be paid. If the checks were combined, the payments made for false checks would have been mailed to legitimate employees (Long, 2009).

It could have been possible to detect the fraud earlier if the accounts payable department would have taken time to scrutinize the invoice signatures for any forgeries. Equally, the company could have engaged the services of the auditor from the word go. It was only after the fraud that the company appointed Tervence McGrane as the Chief Internal Auditor of the firm. It helped since during his attempt to scrutinize the recently submitted invoices to understand how the accounting codes worked, Tervence learnt of fraud indicators (Long, 2009).

The occurrence of the fraud shows negligence among the personnel in the department as they failed to peruse the processed checks for possibility of dual endorsements. It was until Tervence conducted an interview with the Vice President, McGrane, then he realized forgeries in the invoices. It is worrying to realize that with false invoices, Miano managed to collect checks from the accounts payable department.

How technological changes in accounting systems and electronic transfer of funds reduce the likelihood of billing scheme frauds?

Organizations have shifted their accounting and money transfer schemes to the new generation of electronic payment. Such shift has been facilitated by the massive technological changes witnessed in accounting and money transfer. The mobile money transfer is an emerging ecosystem that serves to limit the likelihood of billing scheme frauds. It enables domestic and international remittances by use of wireless carriers that help to limit organizations exposure to fraud and other risk environments (Simic, 2005).

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Technological changes in accounting systems and electronic transfer use fraud detection and prevention systems that help in reducing cases of billing scheme frauds (Simic, 2005). The fraud detection devices used are aimed at detecting cases of fraud quickly when they occur and stopping them as soon as possible. They are available in various forms of electronic accounting and transfer systems. For example, credit card fraud prevention and detection system helps in monitoring customers’ behavior to estimate, detect, plan and curb possible risks (Moeller, 2010).

Electronic transfer systems also record fraudulent data detected in all transactions (Simic, 2005). The recorded fraudulent data are used by organizations in internal auditing that helps correct various lapses in the organization.

Electronic accounting and transfer systems use anti-fraud software modules that help in performing different functions (Marc & Verdier, 2010). For example, the software helps in early detection of fraud and provides relevant information to the fraud analyst in good time for action to be taken. The software allows for fraud detection and prevention in both the issuer and the acquirer sides (Moeller, 2010).

The systems help in limiting the Likelihood of Billing Scheme Frauds by using intelligent tools that are developed from fraud detection and prevention. The tools used are grouped into two categories. Some of them are focused on analyzing data about individuals who are involved in the transactions while others focus on the transaction reports. For example, the Address Verification Service (AVS) is an intelligent tool that was developed to reduce fraud among MOTO Merchants (Simic, 2005).