Regardless of your industry, fraud is something that you will have to combat. The key to fighting or preventing fraud is to have a robust control environment. This would include having written procedures for employees and verification or audits of those procedures by different individuals. One element of fighting fraud is to use the technology you have to help identify patterns in transactions or prohibit sales from happening. Below we will look at a situation that occurred in a retail outlet; and how the use of technology as well as sound audit procedures helped detect the fraud.
A retail outlet has several line-level employees who are granted access to the computer system to process transactions. They are allowed to ring in items and process payments, either by cash or credit cards. At the end of the shift, the cashier needs to do a blind cash drop, they drop everything that is in their cash drawer, and then have their supervisor go through their closing paperwork to ensure they have all of the tickets and credit cards processed for the day. The supervisor writes down the cash amount that should have been dropped and utilizes the systems safe report to ensure the cash was dropped. This system works very well, and cashiers can recognize if they are either over or short before they go home, and they can research before they leave. The system is set up to require a supervisor to log in for the cashier to process a void. A void would be necessary if an item is scanned in for purchase and then the customer chooses to return the item.
" A retail outlet has several line-level employees who are granted access to the computer system to process transactions"
When a supervisor is required to work a register, the procedures should be in place to have another supervisor or the manager cash them out. In this retail environment, the supervisor worked as a cashier and would sell items for cash. When the store was slow, the supervisor would do a void on the sale of the item, leaving a cash credit. The supervisor would then take the cash before doing the blind drop. This item would be placed back in inventory, as the item appeared to be returned. Without the supervisory staff knowing, the management had created system reports that would auto-generate to show all of the voids for the day as well as the supervisor who processed the voids. Management, armed with this report, were able to do an inventory of the items listed on the report to see if those items were actually returned. What they found was the inventory count was short to the systems inventory reports, by the same totals that were voided. At that point, they were able to call in the supervisor to discuss. In this case, the supervisor ended up admitting to stealing the money.
Ensuring you understand all of the capabilities your systems have, and utilizing those functions can help you prevent and detect fraud. Ensuring you have the proper procedures in place and the proper entitlements given to the correct staffing levels will help mitigate fraud from occurring. Understanding you will have some employees that will try to find a way to commit fraud will better help you set up a system of controls to try to combat them before they occur, or detect them when they do.