South East Industries

George Nickson is an internal auditor for South East Industries, an agro products company. On March 31, he reviewed his completed tax return and noticed that the federal income tax withholding on his final pay check was $10 more than the amount indicated on his W-2 form. He used the W-2 amount to complete his tax return and made a note to ask the payroll department what happened to the other $10. The next day, Nickson was swamped, and he dismissed the $10 difference as immaterial.

 On April 16, a co-worker grumbled that the company had taken $10 more from his check than he was given credit for on his W-2. When Nickson realized he was not the only one with the $10 discrepancy, he investigated and found that all 3,000 employees had the same $10 discrepancy. He also discovered that the W-2 of John Prestige, the payroll programmer, had thousands of dollars more in withholdings reported to the Internal Revenue Service (IRS) than had been withheld from his pay check. Nickson knew that when he reported the situation, management was going to ask questions, such as:

How was the fraud perpetrated? What motivated John to commit it?

How vulnerable is the company’s computer system to fraud?

South East Industries

George Nickson is an internal auditor for South East Industries, an agro products company. On March 31, he reviewed his completed tax return and noticed that the federal income tax withholding on his final pay check was $10 more than the amount indicated on his W-2 form. He used the W-2 amount to complete his tax return and made a note to ask the payroll department what happened to the other $10. The next day, Nickson was swamped, and he dismissed the $10 difference as immaterial.

On April 16, a co-worker grumbled that the company had taken $10 more from his check than he was given credit for on his W-2. When Nickson realized he was not the only one with the $10 discrepancy, he investigated and found that all 3,000 employees had the same $10 discrepancy. He also discovered that the W-2 of John Prestige, the payroll programmer, had thousands of dollars more in withholdings reported to the Internal Revenue Service (IRS) than had been withheld from his pay check. Nickson knew that when he reported the situation, management was going to ask questions, such as:

1. How was the fraud perpetrated? What motivated John to commit it?

2. How vulnerable is the company’s computer system to fraud?