Plutonium was a Internet start-up company that was founded in 1988. Plutonium had problems with the technological systems that was needed to support the expanding user base. They connected with Gateway and created phony credit cards to test the system. Jonathan, manager of operations allowed employee (Chris) to have one cause he was trusted and preformed good work. Later, Chris was found to be abusing the credit card but was not severely punished. A few months later Chris was back at scamming the company and Jonathan took notice this time of all the items and expenses begin brought.
Evaluate this case using the three elements of the fraud triangle to identify:
A. Potential pressures for Chris to commit fraud. Pressure is said to cause a person to commit fraud and it can be anything dealing with bills, addiction problems, and having a fancy life style. Sometime fraud is commit out of greed alone having nothing to do with pressure. Chris pressure might have come from family or school both of which the need for money was needed. Chris falls under living the fancy life style and having to pay the bill. As, stated there could have been no pressure at all it was just Chris being greedy not content with making 15 dollars per hour, just wanting more or all.
B. Potential opportunities for Chris to commit fraud. Opportunity is the ability to commit fraud and is created by weak internal controls, poor management oversight, and through use of ones position or authority. Opportunity is the piece that the company should have control over but in Chris situation it was looked over because he was a trusted employee and did an outstanding job performing at his work. Chris opportunity was presented when he was given one of the phony credit cards. Later, he received an official reprimand but was given a warning and probation which done nothing but help him further plan because all he got was a tap on the hand. Opportunity kept showing itself because the management oversight was not working properly nor the internal controls if any. Chris seen that he got by once so, he know he could get by again. Jonathan also provided opportunity by not writing Chris up for his actions because Chris persuaded Jonathan that is intentions were towards the company only. This allowed Chris to further his actions/opportunity to commit more fraud.
C. Potential rationalizations that Chris could use to commit fraud. Rationalization is reconciling his/her behavior (stealing) with commonly accepted notions of decency and trust. Lets just say Chris could have been believing that he was going to lose everything if he didn’t steal the money. Chris could also just thought he was borrowing the money and going to pay it back. Chris could have also believed it was owned to him for all the hard work he was doing. Chris might have thought it was not illegal but know it was unethical to do and believed he was get the money elsewhere to pay it back whenever. Chris may have even thought the things he was getting was unnoticed because he was not the only carrier of a phony credit card.
What are some of the symptoms that fraud potentially exists in this situation? Some of the symptoms that fraud would potentially exists in this situation is that the internal control was weak, management oversight was poor, and Chris has a little authority over his other team members. Internal control weakness comes from not having segregation of duties, independent checks, physical safeguards, proper authorization, proper documents and records, overriding of existing controls, and inadequate accounting system. The management oversight was poor meaning they were not providing any insight or right or wrongs to what was expected of the employees using the phony credit cards. They had no regulations for or to improve the performance, no operational awareness, annual reviews, or “for cause” reviews. Since, Chris has a little authority over his team this is said to be a reason for committing fraud. Meaning he thought he could do as please because he was the head of the group or leader. Some other symptoms could have been analytical irregularities which include: shortages of inventory, the use of too many credits to accounts receivable, or the existence of new vendors. Also, there is the lavish lifestyle and the unusual behavior of one another. There is also the tips and complaints that fraud could be existing.
What could Jonathan have done to eliminate some of the opportunities for fraud? First and foremost Jonathan should have eliminated the number of phony credit cards that he give out so that if anything was to happen he know where it was coming from. Jonathan could have also made sure there was good internal controls in place, monitoring employees and providing hotlines, creating an expectation of punishment, and conducting proactive auditing. They all will reduce the opportunity to commit fraud. Jonathan should make sure that he hire hones people and provide fraud awareness training. This is done by verifying all information on the applicant, requiring all applicants to affirm the truth of the masters set forth in their application, and train management to conduct thorough and skillful interviews. The work environment should be positive and free spirited at all times. This stage is accomplished by having a good corporate code of conduct and conveying those expectations throughout the organization, open-door or easy access policies, and have positive personnel and operating procedures. Jonathan should and could have looked into getting a employee assistance program. This program is to implement an EAP that helps employees deal with personal and non-sharable pressure in their lives. Another way for Jonathan to eliminate fraud is to gains one trust and make sure there is no fear in telling if fraud is being committed.