Professional Documents
Culture Documents
1 CE CREDIT
Travel
Expen$e
& Payroll Fraud
Case Study:
Inquiry, confrontation, admission,
restitution, and internal controls
By Eric A. Kreuter, PhD, CPA, CGMA,
CMA, CFM, MAFF, DABFE, FACFEI, CCA,
CCP, SPHR, Sareena M. Sawhney, MBA,
MAFF, and Glenn D. Sacks, CPA, CGMA
Engaging an independent forensic examiner Ms. Smith was terminated for cause and About the authors:
to investigate concerns of the type men- made full restitution for monies stolen from
tioned in this article will ensure a thorough the organization, and was appreciative for Dr. Kreuter is a partner and Ms.
handling of the concerns raised. Following being treated humanely during the investi- Sawhney and Mr.
the investigation, there is usually renewed gation. The former CFO has agreed to repay Sacks are directors
energy on the part of management to tighten the funds he received that were found to be in the Litigation and
internal controls. either unauthorized or paid in duplication Corporate Financial
with other expense reimbursement. He Advisory Services
Conclusions never admitted to purposefully defraud- Division of Marks
There are many reasons why employees will ing the organization. The organization has Paneth & Shron
commit fraud against their organizations. taken a number of steps toward improve- LLP, working pre-
Such behavior is easier in poor internal-con- ment of its internal systems and has begun dominantly in the
trol environments. Employees can carry out to recognize the events that have occurred New York City of-
expense-reimbursement schemes through as a learning experience. n fice. Dr. Kreuter and
various means. Examples include submit- Ms. Sawhney have
ting fictitious expenses, double billing, and/ References: extensive back-
or inflating actual business expenses. In this Committee of Sponsoring Organizations of the Tread- grounds in foren-
way Commission (COSO) Report, Internal Control
particular case, Ms. Smith created fictitious sic investigations
– Integrated Framework (1992).
expenses by submitting itineraries for trips Golden, T.W., Skalek, S.L., Clayton, M.M., & Pill, J. and also providing
that she canceled. Other examples of ficti- S. (2011). A guide to forensic accounting investi- litigation support
tious expenses can include charging for items gation. Hoboken, NJ: John Wiley & Sons, Inc. services to attor-
for personal reasons, i.e., a hotel expense for Harold, E. & Tobin, S.(2012). Ray Birdwhistell. Re-
trieved March 28, 2012. www.culturalequity.org/
neys. Mr. Sacks has
non-business purposes. Double billing can alanlomax/ce_alanlomax_profile_birdwhistell.php an extensive back-
occur by submitting the same receipts more Shields, G. (2012). Feds’ trouble in paradi$e: GSA pig ground in financial
than once for a period of time. The best took kin on exotic trips. New York Post, April 18, p. 6. statement fraud
way to detect this is by analyzing individual and in forensic pro-
expense reimbursements to the employee to cedures. They have
see whether duplicate amounts appear. Lastly, all been published in the fields of foren-
examples of inflating business expenses can sics and litigation services. Dr. Kreuter
occur when an employee gets reimbursed for CERTIFIED FORENSIC is a member of the American Board of
extra tips when the original tip may already ACCOUNTANT, Cr.FA® Forensic Accounting and a Diplomate and
Learn more about CERTIFIED FORENSIC
be included by the restaurant or claiming Fellow of the American College of Forensic
ACCOUNTANT, Cr.FA®. Call 800.423.9737
expense reimbursement for meals shared or enroll online at www.acfei.com. Examiners Institute.
with a spouse rather than a business partner.