Mr. A. O. Steady, a programmer for One Corporation, had been employed in his job for a number of years. He was the only programmer. There was a separate computer operator and input data operator.

The computer system provides for data from purchase invoices to be entered at a terminal, The data are processed through the computer, and checks for vendors are printed by the computer. Each check is compared with the purchase invoice by another individual before mailing.

One day it was discovered that Mr. Steady had been receiving kickbacks from a company that had received money from One Corporation without sending them any merchandise. The president of the company was puzzled about how Mr. Steady could have perpetrated this fraud. There seemed to be a proper segregation of duties, and the programmer never handled the checks that were printed by the computer.
Required:

a. Explain how this fraud may have occurred and remained undetected.

b. Discuss some controls, including noncomputer types, that might have prevented or uncovered the fraud.

Transcribed Image Text:

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