Biggest threats to the Assets and Inventory of Companies - Essay Example

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Biggest threats to the Assets and Inventory of Companies

It is imperative for companies to have accounting control mechanisms in place to prevent employee theft. A good mechanism that can be used to prevent theft is the fraud tree. The fraud tree can be described as asset misappropriation schemes that are used by employees to target the assets of a company. The two major asset types included in the fraud tree are cash and inventory. Nearly 90% of the frauds occurring in the corporate world are associated with the cash account of the company (Wells, 2001). The major types of cash misappropriation schemes are larceny, fraudulent disbursements and skimming. In term of inventory and assets frauds the most commonly used schemes are misuse and larceny. In the article Enemies Within a fraud scheme example that was described was an account receivable employee that stole over $200,000 in cash from a company. The reason that the accounting clerk was able to steal money was because his job function included collection of cash and accounting receivable posting. This fraud could have easily been prevented by the accounting department of the company by creating a clear separation of duties. The account receivable clerk should have never been allowed to deal with any actual cash transactions. A different employee should have been responsible for the collection of cash payments. ...Show more

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It is important for corporations to have security measures in place to protect themselves from theft and fraud. Companies often invest millions of dollars in security measures to protect themselves from criminals. The problem is that often the biggest threats to the assets and inventory of companies comes from within…
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