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Going to the Chapel… September 11, 2011

Posted by Audit Monkey in The Joy & Pain of Internal Audit, Working Life in Britain.
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An interesting news article caught my eye the other day in that venerated organ, the Daily Mail, about a good bit of old-fashioned employee fraud. A brief synopsis of the events. Kirsty Lane was a part-time accounts clerk at a Video Conferencing firm earning in the region of £15,000 per annum. Anyway, Kirsty decided get married and she decided to marry in some style at a Tudor Hall with harpist, free bar (get in there!) and fireworks display.  The bride and birdesmaids even had matching Ugg boots ( there is no accounting for taste!).  Kirsty, wishing to ensure everyone shared her new-found happiness, invited her boss, Peter Sutton, to the wedding and post wedding nuptials. It was this event, that Mr.Sutton’s suspicions were aroused; how could an accounts clerk afford such a lavish affair?

Redundancy monies from a relative allegedly, but alas no, Kirsty had a case of sticky fingers. In short, Kirsty had been using supplier invoices to generate fictitious payments to a bank account where she was the ultimate beneficiary and stole approximately £170,000. The theft had such an impact on the firm its financial viability was in question. Eventually while Kirsty was absent, an anomaly with a supplier invoice flagged irregularities had been occurring and precipitated further investigation when the scale of the fraud was uncovered.

However, on one level, I’m not too sympathetic towards Mr.Sutton. Basic controls would have prevented this sort of fraud from occurring, e.g. segregation between input and payments, restricted access rights on the computerised accounting system over bank account amendments, full review of payments against supporting documents. (I’m not going to list the more belt and braces controls – you will have to figure those out for yourself). Then again, the problem with owner operated businesses is that proprietors aren’t that risk aware. Of course, part of it is caused by having their hands full generating new business and keeping the existing business ticking over, so business owners often drop what they perceive to be low priority items.

The solution? I’m not going to say implement a ‘risk management framework’ as in a small business it is using a sledge-hammer to crack a nut. If, however, you are running a business as an owner-entrepreneur, surely you must continuously review the bottom line to see where the money is going as no one else is going to do it for you.

Footnote. There was a documentary on Channel Five this week (11/08/14) on various employee frauds. This fraud actually featured. To his credit, Mr.Sutton came across as a very decent guy who was running a business and was prepared to trust people. The other thing which came across is as an entrepreneur, he wasn’t an accountant. Perhaps a contributory factor? Who knows.

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Comments»

1. ITmonkey101 - September 13, 2011

Never mind the Ugg boots, it looks to me like Ms Lane spent the money on pies for hubby and herself.

And as for Mr Sutton, I find it hard to understand why he wasn’t taking more of an interest in all his outgoings especially as his sticky fingered employee “almost ruined” his business. So sorry Mr Sutton, I won’t be investing. I’m out.

2. Audit Monkey - September 13, 2011

Indeed, Kirsty liked her cake. Just goes to prove you can’t always have your cake and eat it, however hard you try!

3. ITauditSecurity - September 17, 2011

So who’s stupider, the frauditor or the frauditee? I say the frauditee, since it was his money. Evidently, Mr. Sutton is no glutton. He shares!

4. phone bill audit - September 27, 2011

I hadn’t heard about this one, should have definitely been noticed…wow!


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