Possible Title: Payroll Fraud and Vendor Schemes: Uncovering

Unit 3 The Smart Company When analyzing the case, I do not believe employees were taking the money since all the employees must punch in on a time clock. If the employees clocked in, showing they were at work but absent, it will be considered payroll fraud. It is possible that clocking in more hours than The Smart Company anticipated left the company $238000 short. However, checks are in place when all the checks are signed and delivered. Nevertheless, that much money was stolen through these schemes would be impossible for a small company without being able to recognize it. In another opinion, the possibility of the payroll department was handling the vendor contracts. Vendor contracts are the responsibility of the Accounts Payable department which then handles the invoicing, entries, and payment for vendors. So there seems would be a big issue with the segregation of duties in this scenario. The payroll department manages employee salaries, finances, and tax information; some even hold Human Resources-based responsibilities such as setting work, vacation, and time off schedules. Accounts Payable analyzes and pays bills from vendors and suppliers. If the Payroll Specialist is doing both jobs, she may be able to include vendors on the company's payroll as well. In this scenario, if the payroll employee can set up a new account with the vendor's name as an employee or have someone in HR do it. The payroll analyst will then be able to set up any desired salary, sign off on the check herself, get it approved, have it posted on the GL account, and issue payment to a new direct deposit account she created for herself. It seems no red flags would be raised because the vendors would still be able to get paid their total charging amount since that is being done correctly through the accounts payable function. Another scenario could be the accounts payable paid vendors for work that was never performed by creating fake vendors. Vendors for the company receive payments under 1099s for their work performed; the fraud could be done by creating fake vendors and paying for services never performed. Also, making a direct deposit account would be exposed by making a business name and having a Tax ID from the IRS (EIN) to avoid suspicion and deceive the audit. They could make multiple accounts and never have to go to the bank other than to set up the account.