FastBuck Company has great internal controls, including extremely thorough internal and external programs. The problem is that the credit manager and the accounts receivable manager have been working together to defraud the company out of tens of thousands of dollars in a scheme that involves fictitious customers, fictitious credit reviews, and secret write-offs of the related accounts. The accounts receivable manager has covered up the fraud by not including the related write-offs and overdue accounts in the periodic reports.
a. How could such a problem occur in a system with great internal controls?
b. How can such schemes be prevented and detected?