The Florida Times-Union reports that a Waycross, Ga., woman admitted to siphoning more than US $2 million from a manufacturer of wooden poles during a four-year fraud scheme. The former office manager was charged with embezzling the money by forging checks on the company’s account and making them payable to herself. She also was charged with using another person’s identification to cash five forged checks totaling US $49,720. Investigators discovered the embezzlement upon checking the woman’s finances after she was arrested on unrelated drug charges.

Lessons Learned

Time and time again, auditors are warned about red flags that indicate a fraud is being committed. Although the presence of one red flag is not always a sign that fraud has occurred, more than one red flag is a good indication that internal auditing should at least consider the possibility of fraud.

In this case, the office manager’s behavior raised several red flags. She lived a lavish lifestyle, went on frequent cruises, paid for major renovations to her home, and had a drug problem. These issues should have been enough to concern management and internal auditing. In addition, key controls were absent. For example, the office manager was able to write checks payable to herself; cancelled checks were not being reviewed; and it appears that only one signature was required to deposit or cash checks. 

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