Question

An audit report found the following:

The required background checks for all new employees were not performed by Human Resources. The corporation had two new sales representatives who committed fraud on their expense reports when they were visiting golf courses across the country. Background checks later were found that they had criminal backgrounds. This loss totaled a $9,051. Additionally, ICE raided the manufacturing facility and found 2 other employees who were illegal aliens who used false social security information to be hired. This hit the local news.

Based on the above answer the following:

Condition – what happened?

Criteria – what is the standard? (the proper procedure that should have been in place to avoid such thing)

Cause – why did it happen?

Effect – cost or problem?

Recommendation – how does the auditor (you) recommend fixing the problem?

Answer 1

Condition- What happen?

Two new sales representative who commited fraud on there exence report of $9,051 when they were visting golf course across the counrty. Later Backgrond check also found out that they both have a criminal background. ICE also raided the manufacturing facility and found 2 other emloyees who used false social securityinformation to be hired. And this were on the headlines which I guess were damaging the goodwill of the company.

Criteria- What is the Standard?

A background check is a process in which a company uses to verify that a person is who they claim to be. Certain things has to be check during a background check like Criminal record, Credit History, Employment history, Education history, Social profiles, Medical record and etc which are required as per the job.

Cause- Why did it happen?

As the required background check for all employees were not performed by the Humna Resources, and the the human resources were also not managed properly, the blame will go to HR department and to the management also.

Effect- Cost or Problem?

The fraud in expence report and the fraud in false social security information has given a bad impact to the goodwill of the company and also have made a little courage to the other employees. This problem has also given a cost damange to the company of $9,051.

Recommendation- How does the auditor recomend fixing the problem?

As a auditor I would give a sugestion to the company that they should perfome a detailed background check of all the employees and a detailed fraud audit in the accounds so that they can see if any other employee has perfomed it or not. And will recommend to perofome this every year so that there would be a fear in the employees for perfoming any fraud.