Due Tonight By 11:30 PM Ettco B A Trusted Full-Time Office M

Due Tonight By 1130pm Ettco B A Trusted Full Time Office Manager An

Due tonight by 11:30PM ET (TCO B) A trusted full-time office manager and bookkeeper for a small law firm (three employees) embezzled $90,000 from its two attorneys over a 3-year period. The attorneys trusted her to handle all of the administrative functions of the office. They often chatted with her while they signed the checks. She produced good work over the last 10 years so it was never reviewed by the attorneys or an outside auditor. The fraud was uncovered by a temp employee covering the position while the bookkeeper was away on her first vacation since she was hired. Evaluate the possible schemes she may have used and the reasons how she was able to get away with it for so long. (a) Choose one possible scheme for embezzlement. (b) List three weaknesses explaining how she was able to get away with it. (c) For each weakness, describe what the attorneys could have done to prevent the loss.

Paper For Above instruction

Introduction

Embezzlement within small organizations, such as law firms, often goes unnoticed for extended periods due to trust-based relationships and lack of rigorous oversight. The case of the law firm’s bookkeeper stealing $90,000 over three years highlights how internal vulnerabilities and complacency can facilitate long-term fraud. This paper explores a specific embezzlement scheme, identifies weaknesses that enabled its persistence, and proposes preventive measures the attorneys could have employed to mitigate such risks.

Selected Embezzlement Scheme: Check Tampering and Forgery

One plausible scheme the bookkeeper might have used is check tampering and forgery. Given her access to the bookkeeping system and familiarity with the firm's financial procedures, she could have created or altered checks payable to herself or fictitious vendors. By endorsing or forging signatures, she could have directed payments without raising suspicion. Her trustworthiness and years of good work likely led the attorneys to overlook periodic review of bank statements before she was discovered. This scheme requires her to manipulate the checks and the bank records, which was feasible due to her close involvement in daily financial operations.

Weaknesses That Enabled the Fraud

1. Lack of Segregation of Duties

The attorneys delegated all financial responsibilities solely to the bookkeeper, consolidating authority over record-keeping, authorization, and reconciliation. Without segregation, she had the ability to both initiate and conceal fraudulent transactions. Her exclusive control minimized oversight and made it easier to manipulate records without detection.

2. Absence of Regular External Audits and Internal Reviews

For ten years, the firm relied solely on the bookkeeper’s reports without external examination. The absence of periodic independent audits or routine bank statement reviews meant discrepancies could accumulate unnoticed. The attorneys’ lack of oversight prevented early detection of irregularities, allowing the fraud to persist.

3. Trust and Informal Oversight

The attorneys’ informal relationship with the bookkeeper, characterized by frequent informal chats, fostered a trusting environment. They did not implement formal controls or checks, assuming the bookkeeper’s integrity based on her long-standing performance. This trust reduced vigilance, enabling her to hide her activities effectively.

Preventive Measures

1. Implement Segregation of Duties

To reduce risk, responsibilities such as check preparation, approval, and bank reconciliation should be distributed among different individuals. For example, one person should prepare payments, another authorizes them, and a third performs reconciliation. This division creates checks and balances that hinder fraudulent activities.

2. Enforce Regular External and Internal Audits

The law firm should have engaged external auditors periodically to review financial statements and bank accounts. Additionally, routine internal reviews, such as monthly bank statement reconciliation and variance analysis, should have been standard practice. These measures increase the likelihood of detecting suspicious transactions early.

3. Develop and Enforce Formal Financial Controls

Establishing formal procedures, such as dual signatures for checks above a specified amount and requiring written authorization for payments, would have created accountability. Training staff and management to recognize red flags and fostering a culture of oversight would further safeguard against fraud.

Conclusion

The case exemplifies how internal vulnerabilities, including lack of segregation of duties, infrequent audits, and over-reliance on trust, can enable embezzlement to occur unnoticed over many years. By implementing robust internal controls, conducting regular audits, and fostering a culture of vigilance, small firms like law offices can significantly reduce the risk of internal fraud. The insights from this case underscore the importance of proactive financial oversight to protect organizational assets and maintain integrity.

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