Collusion in the workplace

Poor internal controls resulted in fraud in excess of $500,000 for a newly acquired division of a publicly traded Fortune 500 Company. The culprits included an hourly line clerk, human resources clerk, an administrative assistant and the human resources manager. Investigators detected the fraud while implementing the existing sound internal control system into the newly acquired division.

The authors obtained the details of this actual case of a Fortune 500 corporation from its director of internal audit. Names and details have been changed. — ed.

One of Alpha Company's goals was to grow through mergers and acquisitions, so it acquired Baker Division of Charlie Corporation, which doubled the size of operations to $5.5 billion. The initial combined numbers were staggering — predicted to be in excess of $50 million with this new relationship — Alpha and Baker.

Years earlier, Alpha Company had integrated its business processes by implementing a popular enterprise resource planning system. At the time of the Baker acquisition announcement, the company had maintained a consolidated, centralized, corporate system of internal controls for all departments. These strong controls and separation of duties ensured smooth operations and early fraud detection.