Trusting Assistants With Access Embezzlement Investigation C ✓ Solved

Trusting Assistants With Accessembezzlement Investigation Case Studyma

Trusting Assistants With Access Embezzlement Investigation Case Study March/April 2012 By Monica Dalwadi, CFE, CPA, CIA; Aaron Raddock, CFE, CFCM Explore the case study of Evelyn Reynolds, a trusted executive assistant, who embezzled more than $100,000 from a children's charity for her own nefarious use. The authors outline how she did it and their investigation. Many executives are lost without their professional assistants who control their daily activities — calendar appointments, meetings, telephone calls and expenses. But what if an assistant has too much control and exploits an executive's trust? Evelyn Reynolds, a supposedly faithful assistant to the chief operating officer at a prominent non-profit organization, perpetrated a multi-faceted fraud totaling more than $100,000.

In less than 10 months, she provided herself with a rhinoplasty, a recreational vehicle and a pile of cash that she didn't earn. (See Figure 1 below.) In this article, you'll learn: · How she perpetrated this fraud and the techniques she employed. · The warning signs that you, your supervisors and your executives need to know. · Details of our investigation. · Controls to help mitigate the risk of a similar fraud at your organization. Embezzlements are common, but they're often unnoticed until it's too late. (All the names of businesses and individuals are fictitious to protect the privacy of the victimized organization.)

LOYAL AND FAITHFUL EMPLOYEE

Evelyn worked for Children's Education First Inc. (CEF), a prestigious non-profit organization in Chicago. CEF's mission is to provide funds for underprivileged children's education expenses. As the COO's assistant, she had direct and indirect access to a variety of functions from credit card purchases to purchase order requests. Evelyn had built a good relationship with her supervisor and other members of the organization. She had an excellent work ethic, went above and beyond her normal duties, and employees viewed her as a friend and co-worker. After she worked at CEF for about one year, Evelyn's personal life began to collapse.

She and her third husband divorced, which created emotional and financial stresses. She also became entangled in a property suit with her brother. She wasn't able to take her kids on their traditional summer vacation, and she became increasingly self-conscious because she couldn't participate in expensive activities with her friends. As the financial stresses mounted, Evelyn began to feel that she was underpaid given her strong performance rating and work ethic. She started thinking of small ways to take a little bit until things improved.

Points of Entry and Methodology

As the administrative assistant to the COO, Evelyn touched every area of the business that her supervisor did, including: access to funds via organizational credit cards and petty cash, authority to request payments directly, create purchase orders, approve her own timecards, and manage petty cash and phone expenses. Her methods included the 'salami technique'—small, spread-out thefts that avoided immediate suspicion—by stealing in numerous small transactions across various functions. Her access and the weaknesses in internal controls allowed her to execute her schemes successfully.

Methods of Misconduct and Investigation

Evelyn forged signatures, submitted bogus expense applications for her children, manipulated journal entries, and arranged for payments to herself or vendors directly linked to her personal needs, such as rhinoplasty and an RV. Her overuse of the organization’s credit card and inflated phone charges were also red flags. The fraud was uncovered when an internal review noted suspicious duplicate checks benefitting her daughter and forged signatures on approval documents.

The investigation involved reviewing transaction histories, signatures, vendor inquiries, and tracing checks issued to her family. The FBI was involved due to interstate mailing of checks. Evelyn was eventually charged with mail fraud, although she did not serve jail time nor make restitution. Post-fraud, the organization implemented enhanced controls, including segregation of duties, background checks, restricted access, quarterly change review reports, integrated systems, and stricter policies for procurement and timekeeping.

Recommendations for Prevention and Detection of Fraud

Organizations should establish comprehensive internal controls tailored to reduce opportunities for trusted employees to commit fraud. Effective segregation of duties—such as separating authorization, custody, and recordkeeping—limits control of any single individual. Regular supervision, peer reviews, and audits are crucial in early detection. Staff training on fraud awareness, implementing automated monitoring systems, and maintaining a vigorous whistleblower policy are also vital. Proper background screening before hiring minimizes the risk of hiring employees with past misconduct.

Comparison with Similar Court Cases

In comparing Evelyn’s case with similar court cases obtained via Westlaw, common themes include abuse of high-level access, small but frequent thefts, forged signatures, and delayed detection due to weak controls. A notable case involved a finance director misappropriating funds through fake vendor invoices and misclassified transactions—highlighting schemes like billing fraud and weak oversight. Both cases utilized the 'salami technique' and involved breaches of internal controls, emphasizing the importance of segregation duties and transaction monitoring.

Red Flags and Timely Action

Red flags included duplicate payments, inconsistent signatures, suspicious vendor addresses, unexplained expense spikes, and delayed reconciliation reports. In Evelyn’s case, the flag was the duplicate check request for a 'child in need' that was her daughter. Timely action was hampered by organizational trust and lack of oversight, allowing her misconduct to persist for months. Early detection could have been facilitated by periodic independent audits, stricter approval processes, and real-time transaction monitoring software.

Enhancing Internal Audit Processes

Internal auditors should perform regular surprise audits, focus on high-risk areas such as payroll, petty cash, and vendor payments, and implement continuous monitoring tools that flag anomalies. Establishing clear policies for documentation, approvals, and access controls, along with frequent review of transaction reports, can significantly reduce fraud risks. Training auditors to recognize fraud indicators and promoting a culture of accountability further strengthen internal oversight.

Conclusion

Organizations, especially nonprofits and charitable institutions, are vulnerable to insider fraud due to high trust levels and inadequate controls. Evelyn’s case demonstrates how even trusted employees with legitimate access can perpetrate significant fraud over time. Implementing robust internal controls, fostering transparency, and maintaining vigilant oversight are essential steps to prevent similar breaches. A culture emphasizing ethics and continuous monitoring can greatly diminish opportunities for trusted employees to commit fraud and detect misconduct early.

References

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