|← Formation of Construction Contracts||DNA Analysis and the Ideal Detective →|
An organisation with weak internal control system is vulnerable to fraud by its employees and other stakeholders. Some of the reasons that lead to fraud include; poor controls, non-competitive remuneration to employees and a continued culture of fraud by employees. These conditions usually propel the fraudulent cases committed in an organisation.
The most common type of fraud is collusion between customers and sales invoicing departments. Collusion between the two entities is usually enhanced by lack of strong controls. The sales department usually issues delivery notes to non existing customers in an attempt to misappropriate goods. The other common type of fraud is where the sales department fails to give despatch documentation. Lack of documentation enables the sales department to release goods without delivery notes. Cashiers are known to be the best in committing fraud. They usually raise credit notes in an effort to cover their misappropriation of cash. Finally, the biggest fraud committed in the company by accountants is teeming and lading. This involves misappropriating monies received by a debtor, and then the accountant waits for another debtor to pay his debt. If the second debtor pays his debt, the accountant records the money issued as belonging to the first debtor, and this process becomes cyclic.
Production involves the use of materials as well as the available labour force. The source documents mostly used in production include; purchase order, invoices, local production orders (LPO), goods return note (GRN) and material requisition note. These documents must be produced every time a transaction takes place.
There are various controls that should be instituted in the production process. These controls require that only specific employees to be authorised to apply for coded requisition of goods in the organization. In addition, instituting a central buying system ensures that goods are bought in bulk so as to enjoy quantity discount. Also, purchases should be made from a reliable supplier so that the goods should meet the company’s quality standard. Furthermore, the local purchases order should be serially numbered to ensure that goods indicated in the received note match with the supplier’s invoice.