Question

An employee devises a payroll scheme that costs the employer $150. The employer discovers the fraud but decides not to confront the employee since the amount of the fraud is small.

Discuss why the above course of action is not advisable and how you would handle the situation?

Answer 1

* Fraud no matter small or big should always be reported. Non reporting of fraud may lead to bigger frauds in future and may also encourage employees to continue doing such frauds. * Employee devises a scheme which costs nominal amount of $ 150 but employer choses not to report it which may lead such employee to do bigger frauds in future. * Also one frauds are always linked to another frauds and disclosing of one fruads may lead to unearthing of other frauds as well. Employer should chose to disclose such frauds to Audit Committee or senior reporting authority. * Such frauds should reach properly to management so that call can be taken what to do next. Generally, frauds are reported to shareholders or owners of the company so that nothing is left which is hidden from the owners of the company. Also, auditors have a responsibility to report frauds. Even, employees have responsibility to tell the auditors all that they know about frauds so that it eases out in unerathing any or all frauds. * The advisable course of action would be for the employer to report such fraud committed by employee to the management. * Then is it upto management to take a call what to do next. * Non reporting is not proper and not in favour of the company. In such a situation, I would confront the employee and understand the whole situation. * If found guilty, I would report the fraud to audit committee or my immediate reporting authority.