The impact of employee and management fraud is staggering both in terms of dollar costs and the effect on the victims. For each of the following independent cases of employee fraud, describe the recommendations internal auditors should make to prevent similar problems from occurring in the future.

a. A retail store that was part of a national chain experienced an abnormal inventory shrinkage in its audiovisual department. The internal auditors, noting this shrinkage, included an in-depth evaluation of the department in the scope of their store audit. During their review the auditors learned from an employee that a particular customer bought a large number of small electronic components and that the customer always went to a certain cashier’s checkout line. The auditors’ work revealed that the cashier and the customer had colluded to steal a number of electronic components. The cashier did not record the sale of several items the customer took from the store.

b. During an unannounced visit to a large hospital, internal auditors discovered a payroll fraud when they observed the distribution of paychecks. The supervisors of each department distributed paychecks to employees and were supposed to return unclaimed checks to the payroll department. Wlien the auditors took control of, and followed up on, an unclaimed paycheck for an employee in the food service department, they discovered that the employee had quit four months previ¬ ously. The employee and the supervisor had had an argument, and the employee had simply left and never returned. The supervisor had continued to turn in a time card for the employee and had taken the unclaimed checks and cashed them.

c. While performing an audit of cash disbursements at a manufacturing firm, internal auditors discovered a fraud committed by an accounts payable clerk. She made copies of supporting documents and used them to support duplicate payments to a supplier of manufacturing materials. The clerk, who had opened a bank account in a name similar to that of the supplier, took the duplicate checks and deposited them in her bank account.