Company Check Fraud

Employee Theft: The Alteration of Company Checks

The client company is a heavy machine wholesales business, and we prepare monthly financial statements for them.

When my staff took a look at the cancelled checks with the bank statements, she noticed that some checks have been altered. The original payee name was erased and the new payee name was typed up. She continued to investigate the cancelled checks from the past few months and found out that the amount on two checks which were issued in different months were altered. She also checked the vendor files and original invoices. The original invoice did not have any payment information or documentation, such as check number, paid date and approval date.

The accountant at this client company used unstamped original invoices twice to issue two checks: one for the vendor and the other one for herself. After she altered the payee name, she deposited the check into her bank account.

I personally called her to have a meeting with her to discuss monthly financial statement. We were supposed to meet at 10:00 am on the following day, but when I arrived, she was not in. The manager called her apartment, but the telephone was disconnected.

Later, the manager found out that she closed her bank account and moved out the apartment a day before our meeting. He also found that the total amount of money this accountant stole from the company during her two year employment was more than $75,000.

We recommended to control accounts payable in the following ways:

All invoices need a received date stamped on it.

All invoices must be approved and initialed by the manager.

Check number should be written on the original invoices (Do not use a copy of the invoice).

Check mailing date must be written on the original invoice.

The manager should check cancelled checks every month.

After internal controls were implemented by us, the company saved monthly expenses by $5,000. The vendor files are well organized and the manager can save time to look for documents.  Muso & Co can help tighten up your accounting system to not only prevent employee theft, but also to run a smooth accounting operation.