Where is Fraud Likely? - Part 10

Net Pay Does Not Tell the Whole Story

A company president took pride in signing the company’s pay checks.  He knew that owner-manager controls were important, so he looked carefully at each paycheck as he signed it and he knew what each person’s bet pay should be.  He also knew the total amount of net pay for each pay period.  The internal accountant for the company knew that the resident only looked at net pay.  He inflated his gross salary substantially and increased his federal withholding by the exact same amount.  He knew that the company president never looked at gross salaries or at the payroll returns.  It was several years before the fraud was discovered.

The company president should have been looking at all payroll - gross to net.  Someone independent of the internal accountant should have approved the payroll tax returns.

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