Rescuing the Company

Top executives can drive their companies close to bankruptcy because it’s often easy for them to circumvent controls. “Bob” was the deputy president director of a branch of an international technical consulting firm with its head office in Europe. He was able to make false disbursements of cash totaling approximately US$250,000 over two years because this branch firm didn’t have an internal auditing department. The head office’s internal auditors came about twice a year to review the branch firm’s compliance with technical rules and procedures, but they never conducted actual financial audits. (A deputy president director is similar to an American chief operating officer.)

The branch firm’s president director (similar to an American company president or CEO), who had very limited knowledge of accounting and finance, unwittingly verified and approved the fraudulent disbursements. He trusted Bob because they were longtime friends, and he let Bob approve disbursements without requiring his own authorization.

DEPUTY DIRECTOR PRESIDENT’S FALSE EXPENDITURES 

An established client had given the company a new assignment. The president director appointed Bob to manage the entire project. The board of management of the branch firm (which adopts the American board of director system) gave Bob the authority to oversee the project’s financial operations.