Management responsibilities at the company changed that involved

Management accountant’s role and responsibility
is to ensure the company’s financial security, essentially handling all
financial transactions. If I were the management accountant at Diann’s company
I would audit financial statements. I would reconcile each expense receipt and
check with the bank statement and book report. I would confirm that there is
not any duplicate submission, checks issued twice, legitimacy of the person or
company to whom checks are issued and so on. Any irregularities
would raise the flag and it would alarm the accountant to review it in more
in-depth and Diann’s fraud schemes would have been caught. I would have most
likely noticed the duplicate reimbursements that Diann was issuing for herself
and the personal charges that she was making on her company credit card. Due to
the lack of segregation of duties in our company, it was easy to be reimbursed
twice for the same receipt and make personal charges on her company credit
card. She wore many hats such as, bookkeeping system, handled payroll and
interacted with outside vendor. Due to the lack in segregation of duties Diann saw opportunity to commit fraudulent activities, which could
have been eliminated or diminished if our company had segregation of roles and responsibilities.

An internal auditing function and segregation of duties could have protected
her and our company from the loss incurred due to her fraudulent actions.

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Diann was a valued, trustworthy employee and quickly earned
the respect of her employer. Sometimes trusted employee become violator when
they are having a financial problem that is non-sharable. When Diann began
committing fraud, she was going through personal as well as professional
changes. She was expecting her second child and also her responsibilities at
the company changed that involved significant amount of travelling. She was
getting used to the lavish lifestyle that was introduced by her job
responsibilities. She felt there is no harm in in using the company money for
personal expenses, such as family trip, bills and office decoration. Additional
responsibilities and lavish lifestyle caused economic downturn in her life and
it caused Diann to commit financial fraud in the company. Diann’s rationalization to commit
fraud started with small clerical mistake when she took a personal family trip.

The travel agent charged her family trip to her corporate credit card. Diann
had full intention of rectifying the error but she delayed it over a longer time
period. Delayed in notifying the company and not taking the necessary action to
correct the mistake allowed Diann to rationalize additional charges.

If I were Diann, I would have rectified the
credit card charges immediately as soon as I find out and let the owner know
about it and thought of committing fraud would have never crossed my mind


Clearly, internal auditing is an important part of any
business regardless of company size and industry. Internal auditing adds value
to the company by protecting the business from fraud and inefficiencies in
their operations. It allows the company to better measure and manage their risks,
which results in an improved overall company. By evaluating risk and making suggestions
to upper management, the internal audit function can save companies from situations
like Diann Cattani’s.