Fraud examples
Fraud Example 1
A minority stockholder/general manager of a dealership was wholesaling used cars with substantial losses to a company in which he was a 50% owner. The fraud was discovered because the dealership owner had a history of better-than-average gross profit percentages at other dealerships, but was losing his shirt at this one. Suggested control procedures that could have prevented this include: 1) dealership owners should approve all wholesalers and review any transaction where a loss occurs; 2) properly screen employees/minority owners.
Fraud Example 2
A parts manager was selling dealership parts on the side. The fraud was discovered when the year-end parts inventory resulted in a $100,000 write-off. Suggested control procedures that could have prevented this include: 1) always perform a year-end physical inventory; 2) if you suspect theft, contact your attorney/accountant to discuss how to proceed.
Fraud Example 3
A cashier was stealing money from daily cash receipts and making up the shortages with the following day’s cash receipts (lapping). The fraud was discovered during a review of the bank reconciliation when the office manager noticed that the exact same deposit was made on two consecutive days. Suggested control procedure that could have prevented this is a simple segregation of duties – the cashier was also preparing the daily deposit slip, and no one was responsible for reconciling it with the daily cash report.
Some of the services we offer dealerships to help combat fraud:
- Preparing bank account reconciliations on a surprise basis
- Reviewing cancelled checks
- Performing physical inventories
- Analyzing parts inventory activity
- Summarizing fraudulent activity to present for insurance policies and police investigations
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