HR management help on: Trolley Dodgers

Executive SummaryThis report gives the brief overview about the frauds which take place in the organization because of its internal employees or workers. In general, there are various types of fraud such as Embezzlement of financial resources of the organization, asset misappropriation, corruption and financial statement frauds. In the said case study of the trolley dodgers we see that the accountant Mr. Edward Campos the high time accountant who was with the dodgers for a long period fraud the dodgers for so cleanly that they were not even able to put a single finger of doubt on him. Mr. Edward Campos embezzled several hundred thousand of dollars from the club in his period of service. The internal control weakness was also seen in the dodgers’ club payroll system like the payroll system was designed by a single person that is the accountant Mr. Edward Campos.  At last, we can conclude that through the use of internal control an organization can avoid its frauds and prevent itself from such fraud that might have occurred if such internal control were not put up.

Employee fraudsThe frauds which take places in an organization because of its internal workers or employees are known as employees’ frauds. Frauds can be defined as an intentional act done by one or more individuals among management of an organization, those charged with governance, employees or even third parties such as competitors etc (Martin, 2004).   These kinds of activities of fraud may involve the use of cheating others or the organization to gain an unfair position. Such an unfair or unjust position may be attained by an action of mismanagement which may also be illegal. Frauds can be done by many people at various level of management. It would not be wrong to comment that due to today’s current economy, we will find fraud at each and every level of an organization.

Though frauds can be of many types and frauds may have many consequences. Such consequences may have a huge impact on the organization. These actions not only harm the financial status of the organization but also disrepute the name of the company in the industry. Just because of such misdeeds of one or few employees the whole staff of the company has to suffer.

Types of fraud

1)      Embezzlement of financial resources of the organization– Embezzlement of cash in a layman language mean an act of distrust or dishonesty in regard with cash done by an individual or group of people to whom such cash or money was entrusted. The act of embezzlement can be done on other assets also but generally we relate eh term embezzle with cash (Chris, 2009). For example, in the case of embezzlement an employee’s steals the cash from the office and elopes with the cash.  The penalty for embezzlement is fine or imprisonment or both fine and imprisonment.2)      Asset misappropriation – asset misappropriation occurs when the people managing the asset start misusing, misappropriating or stealing the asset from the organization. Asset misappropriation is an insider fraud done by the employees (Frankel, Johnson, & Nelson, 2002). The relation between auditors’ fees for non-audit fees and earnings quality, Stanford University This fraud can be done by the employees for their own benefit or the employees may do it for the third party. These asset misappropriation frauds are generally done by employees who are at a higher level in the management of the company. The assets which are generally stolen consist of cash, cash equivalents, credit notes, vouchers. But at a higher level the assets which are stolen by the people who are charged with the governance of the company; consist of company’s intellectual property, some important data or even some loophole information etc. We can also say that embezzlement is a part of asset misappropriation

3)      Corruption – in an organization the biggest drawback is corruption and bribery; which is a common sight now a days (Martin, 2004).  Employees are involved in these kinds of misdeeds so deeply that it is next to impossible to change them. Corruption and bribery are always together. Employees may take up commission from the supplier of raw materials and other goods and services and in return provide them the contract with the company. The employees may also take bribes from the vendors and in return purchase material or services from them on behalf of the company (Coffee, 2000).  Employees may also give unusual and high discounts to their anomalies. They may also give discounts to other buyers on the condition of some discount amount going into their own pockets. Like ways there can be n no. of tricks and tactics which the employees may use to fill up their own pockets and the sole loser will be the organization and its reputation.

4)      Financial statement frauds – financial statement fraud is a very serious offence and fraud. These financial statement frauds are done usually done by the employee who has easy access to the books of accounts, and such employee is in a trust worthy position (Ford,   Austin & Ramsay, 2003). In financial statement fraud the employee falsely make fake entries in the ledger or journal, he issues fake bills, teaming and leading frauds also comes into this category of frauds. Employee may record high revenue, misappropriate the collection from debtors etc. these frauds are normally done by employees who are entrusted by the company, who are placed at a high level in the organization and by those on whom the doubt will not be easily be placed.

In the said case study of the trolley dodgers we see that the accountant Mr. Edward Campos the high time accountant who was with the dodgers for a long period fraud the dodgers for so cleanly that they were not even able to put a single finger of doubt on him. Mr. Edward Campos was an expert of accounting with the company. He worked with dodgers for almost 20 years. Initially he worked so hard to make his way up and finally the achieved the post of chief payroll operator. After attaining the post he took up the whole payroll processes in his own hands. He constructed new payroll system which was only understood by Mr. Edward Campos. He controlled the system so completely that he himself made all the entries in the system. Not only had this he had the system of payroll so controlled to him that he himself personally filled the 400 employees’ payroll cards. Each and every element of the pay roll system was so well fully understood by Mr. Edward Campos that he did not even allowed anyone to interfere in the so made system. Mr. Edward Campos was not only known for his work ethics but also for his loyalty and the dodgers’ trusted him completely.

 The employees fraud indicated in this case are as follows:There is a fraud relating to asset misappropriation. Mr. Edward Campos embezzled several hundred thousand of dollars from the club in his period of service. The trust of dodgers’ was misplaced in Mr. Edward Campos. Mr. Edward Campos according to the court added fictitious entries of various departments in the payroll system. Not only had this Mr. Edward Campos inflated the no. of hours of worked by several workers then after this he divided these overtime payments into half with the employees. Mr. Edward Campos did wrong calculations also. Like when an employee is earning $ 7 per hour. And the same employee is receiving $ 2000 as a week’s payroll.

Internal control weaknesses of The Dodgers Club and their remedies

According to Committee of sponsoring organization internal control is a process which is related to those charged with the management that is the board of directors and other managerial personals. These controls are designed in such a manner that they provide a reasonable assurance regarding the effectiveness and efficiency of the operations of the company (Frankel, Johnson, & Nelson, 2002). These internal controls assure the user about the reliability of the financial statements and annual reports of the company. Not only has this internal control also helped the company in checking that the work of the company is being carried on according to the compliance of laws and applicable rules and regulations (Barry, 2008). Internal control works at different levels of effectiveness of operation in an organization. The management and board of directors understand the way the operations are being managed by the company and its employees (Ramsay, 2001). Firstly they need to check up the financial statements which need to be publically distributed should be free from errors, miscalculations, misstatements and no information is contradictory to the financial statement. The internal controls should be developed in such a way that they may indicate the management if there is any attempt either intentionally or unintentionally of not following the law or contradicting any work or statement  which is not in accordance of the law or is disobeying any rule or regulation as the case may be (CLERP, 2002). We can conclude that though internal control is a process but its implementation is a state or condition which is attained at one or more point of time. Internal control is a process set up by the organization to help achieve its goals and objectives. If internal controls of an organization are good then there are less chance of frauds and misstatements but on the other hand if internal controls of an organization are weak then the chances of misstatement and frauds are high.

The internal control weaknesses which were seen in the dodgers’ club payroll system are as follows:

The payroll system was designed by a single person that is the accountant Mr. Edward Campos. The payroll system was only understood by Mr. Edward Campos only. The control of payroll system was in the hands of Mr. Edward Campos only. He personally filled each and every card, and he even came back from his vacation to do the payroll.

All these incidents were leading to a situation of one man doing all the job which was a huge indicator that the internal control in the payroll department needs to be rechecked by the dodgers’ club and the work of payroll may be shared between other accountants or other high grade employees (Tomasic, Bottomley & McQueen, 2002). The dodgers did a big mistake by putting their trust on Mr. Edward Campos and giving him the sole responsibility of the whole payroll. Not only this dodgers club after giving the whole responsibility to Mr. Edward Campos did one more mistake by not putting any check on his work. The second mistake done by the dodgers club was that they did not check or verified the system which was made by Mr. Edward Campos. If the dodgers club would have verified or checked the payroll system with an expert then the system would have had good control and the chances of such frauds may be reduced to a great extend (University of Cambridge, 2002). Other than this if the system was made or verified by an expert then this system of payroll would have been understood by many employees and the sole control of Mr. Edward Campos would have been decentralized which would on the other hand reduced Mr. Edward Campos control on the payroll and the chances of asset misappropriation would have reduced to a large extent. As we know that if a single person is allowed to work on a single task of job or in a single department then the chances of that person doing the fraud increase (Ramsay, 2001). Due to this, it is always preferred to keep changing the employee position from one department to another or from one branch of company to another. In many big organizations the employers are advised by the auditor to send their old and trusted employees on vacations and then the organization’s auditor checks for any fraudulent activities that might be carried on by such old and trusted employees. This is done because if such employees are in the office then they know the frauds they have made and they can hide their frauds very easily and then it will be a great difficulty for the auditor to check up and catch hold such fraudulent activities. The same incident happened in the above case of The Trolley Dodgers Mr. Edward Campos the accountant was also on a vacation but he came back from the vacation just to do the payroll this was a big indication for the dodgers club as there is some fraud going on in the club. If at that time only the dodgers club have taken up steps and made a check on the accounts and system the fraud would have reveled at that time only (Frankel, Johnson & Nelson, 2002). If such precaution would have been taken earlier by the club the loss of such cash and asset misappropriation would have been avoided.

So, we can conclude that through the use of internal control an organization can avoid its frauds and prevent itself from such fraud that might have occurred if such internal control were not put up. But it is a misperception that by the use of internal control an organization is fully secured. As internal control is only a process which has reasonable assurance but internal controls cannot be said to have an absolute measure of safe guarding the organization from fraudulent activities

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