What Procedures Might The Fraud Undetected For 13 Years

4. Explain why the fraud remained undetected for 13 years. What procedures might the auditors have performed to detect this fraud in a timelier manner? The fraud was undetected because of a lack of internal controls. There was a lack of segregation of duties between who collected the receipts and who prepared the deposits. Sally collected all of the receipts, closed out the drawers, and prepared the deposits. Since she performed all of these duties, she could easily cover her tracks by making sure the receipts matched the deposits. This would give the illusion that everything matched even though she was embezzling. She was also completely trusted by everyone around her at work. They never had a reason to be suspicious of her so they didn’t question
Even though the profit margin percentage remained unchanged, net profit was decreasing. This should have seemed odd considering that more students were paying the CHS fees and they were providing more services. If they would have projected net profit based on these factors they would have seen a material difference between their projection and actual profit. Second, the auditors could have looked at the controls. If they would have talked to employees and management about control procedures, the auditors would have noticed a deficiency. Sally would never have been allowed to perform the duties she was performing if they had done adequate control testing. Third, the internal auditors could have looked at the leave records for each employee. By doing this they would have noticed that Sally never reported any vacation. After discussing why she never reported vacation, they would have discovered that she came in at night when she was sick to prepare the daily deposit. This odd behavior would have tipped off the auditors that a fraud was occurring.
5. What is the appropriate course of action for you to take? Do you have any recourse? What should you do