Internal Fraud Resolution: A Case Study of Controls and Prevention in Small Business Operations
Overview
This case study examines internal fraud occurring at a small privately-owned golf course in Montana that loses approximately 10% of annual revenue to employee fraud. The paper identifies operational vulnerabilities in procurement and payroll processes and proposes solutions including implementing an approval authority, separating employee responsibilities from vendor negotiations, and introducing technology systems to enhance internal controls and reduce fraud.
What this case study covers
- Introduction and problem statement identifying 10% annual revenue loss to internal fraud
- Analysis of vulnerabilities including unsupervised check signing authority and payroll entry systems
- Proposed solutions utilizing fraud triangle framework with priority on procurement controls and separation of duties
- Technology implementation strategy for integrated organizational information systems with tiered access controls
Preview
Internal Fraud Resolution: Case Study
Your Name
Department of ABC, University – Whitewater
ABC 101: Course Name
Professor (or Dr.) Firstname Lastname
Date
Internal Fraud Resolution: Case Study
Introduction
The current case involves a small privately-owned gold course in Butte, Montana. Having been in operation for 25 years, the golf course runs a small shop (golf equipment, clothing, & accessories) and a restaurant (breakfast and lunch), each under the care of one employee. The other two employees are tasked with running the maintenance and operations of the golf course. Despite the business's success, accounting outcomes indicate an annual loss of 10% of revenue through internal fraud. The current paper aims to establish solutions to this problem while keeping the issue in-house since Butte is a small town where rumors can ruin a business.
Given the scenario above, as the owner of this golf course, what/which aspects of operations can you change immediately to reduce the amount of fraud that is currently occurring:
While it is difficult to establish the exact channels through which fraud may occur, the case study reveals several vulnerabilities easily exploited by employees who have ulterior motives. For instance, employees are left with permission to sign checks so that vendors and suppliers are paid on time whenever the owner travels. The organization already has internal controls for placing orders for suppliers, but it seems these measures have been breached already.