Find and describe an instance of payroll fraud (you may use the Internet, newspapers, or other news sources). How was the fraud committed? How was it detected? What was the control weakness that allowed the fraud to happen? What were the monetary losses associated with the fraud?

CASE A: College Products

College Products is a division of a large manufacturing company. College makes a variety of collegiate branded products, sold on campuses worldwide. Most employees are paid on an hourly basis. Employees receive yearly reviews to evaluate performance and to determine an appropriate pay increase. College’s payroll is processed by the corporate payroll department from input documents prepared by College. The following HR and payroll procedures are related to the hourly payroll employees at College.
Department supervisors initiate requests for additional employees by filling out a three-part employee requisition form. After a requisition is completed, the department supervisor signs it, files a copy by date, and gives the remaining two copies to the production supervisor. The production supervisor reviews and signs the copies and gives them to the HR manager. The HR manager reviews the request with the division controller.
They both sign the requisition. The pay rate for the job also is determined at that time and included on the requisition. If the requisition is approved, the HR manager initiates hiring procedures by placing advertisements in local papers and announcing the opening internally. The HR manager and the supervisor interview the applicants together. They then evaluate the applicants and make a selection. The HR manager and the employee fill out the two-part wage and deduction form.
The HR manager files a copy of the wage and deduction form and the personnel requisition by employee name. The remaining copies of each form are given to the division accountant.

The HR manager selects and reviews the records from the personnel file for employees who are due for their annual review. The HR manager puts some basic employee information on a three-part review form and gives it to the appropriate supervisor for evaluation. The supervisor completes and signs the form, files a copy, and gives the remaining copies to the production supervisor, who reviews and signs the evaluation.
The production supervisor returns it to the HR manager. The HR manager reviews it with the controller. They assign a new rate and sign the review form, which is given to the division accountant.
The division accountant uses the new employee information and the employee review form to prepare payroll action notices. The accountant signs the payroll action notices and files them with the other related forms by date. Each week, a clerk in the corporate payroll department retrieves the payroll forms from the division accountant, checks the signature on all payroll action notices, and processes the payroll. The forms, checks, and reports are sent back to the division accountant. The division accountant refiles the forms and gives the checks to the production supervisor, who in turn distributes them to the employees.

CASE B: Compu-Fix, Inc.
Compu-Fix, Inc. is an independent contractor that provides technical support services under contract to government and nongovernment entities. The following process is used by Compu-Fix to process weekly payroll for hourly support and service personnel.
Compu-Fix has a legacy computer system to which payroll personnel have online access from PCs located on their desks.
Each week, the computer prints time sheets using the employee/payroll master data. After receiving the time sheets from IT, the payroll department distributes them to the various department supervisors, who give them to employees. The employees fill in the time sheets each day and give them to their supervisors at the end of each week. Department supervisors review and sign the time sheets and return them to the payroll department. Payroll clerks key the time sheets into the current week’s payroll activity data and then file them alphabetically by department.
At the start of the weekly payroll process, the computer creates the current week’s pay data using the employee/payroll master and the current week’s activity data. The following items are then printed from the pay data: checks with attached stubs, stubs for directly deposited checks, bank deposit slips for directly deposited checks (one deposit slip for each bank, which lists all the accounts to be credited), a single check for each bank receiving direct deposits, a check register, and various payroll reports.
The computer operator gets the check-signing machine from the cashier and signs the checks. The checks, stubs, direct deposit slips, and check register are given to the cashier. The payroll reports are given to the payroll department.
The cashier checks the total and the number of checks against the payroll register and then sends the checks with attached stubs and the stubs for direct deposits to the department supervisors, who give them to the employees. The cashier then mails the direct deposit slips and checks to the banks.