Employee Fraud in the Automotive Industry: A Detailed Report

This report examines an employee fraud case within the automotive industry, specifically focusing on a scenario where employees leaked research and development information to a competitor. It begins with an executive summary and table of contents, providing context for the analysis. The discussion section delves into actual and potential internal control weaknesses, such as inadequate documentation, undefined key business cycles, lack of authorization controls, insufficient oversight, outdated information systems, and inadequate security measures. The report then recommends internal controls for a hypothetical business owner named George, including employee behavior observation, employee awareness programs, and implementation of robust internal control systems. A one-page extract of a procedures manual is included, outlining fraud risk management steps. The report concludes by emphasizing the importance of security, risk assessments, and communication in preventing employee fraud. It also provides a comprehensive list of references to support its findings.

Running head: ACCOUNTING SYSTEM
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Name of the Student
Name of the University
Author Note

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Executive summary
The main purpose of the research paper is to investigate the cause and the impact of the
employee fraud which is focused in one of the best company of the automotive industry. The
article which is chosen over here is the employee fraud in Jaguar Automobile. The paper will
provide a basic over view of the employee fraud and discuss the causes of fraud. It will also
recommend suitable ways in which it will produce the suitable strategies to minimize risks.

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Table of Contents
Introduction......................................................................................................................................3
Discussion....................................................................................................................................3
Actual and potential internal control weaknesses which allowed the fraud to occur are
discussed over here :....................................................................................................................3
As the employee fraud is a significant problem faced y the organizations of all types, locations
and size, few of the internal controls which can be recommended to George’s business that
could be implemented to minimize the risks associated in the business are :.............................5
One-page extract of the procedures manual which could be implemented by Susan to
minimize the risk of this type of fraud occurring within his business.........................................7
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

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Introduction
The employee fraud case which is chosen for the research paper is Jaguar Automobiles.
Qualitative data analysis was used for the study. Also two methods or techniques were use for
the data collection. The first article was the content or the document analysis on the reports
which were issued by the organization. The second one was the series of interviews and
disciplinary actions taken with the employees from the different level of departments of the
company. The employee fraud article states how few of the employee in the organization
gathered the information of the research and development of their upcoming premium class
vehicle to another automobile company in Australia.
Discussion
Actual and potential internal control weaknesses which allowed the fraud to
occur are discussed over here :
 Inadequate documentation or the records were not kept properly – the documentations
are known to provide evidence of the underlying transactions impose from the business.
In the case of the Jaguar Automobile industry the top level management was not keeping
a track of the documents for the research and development. The documents were not pre
numbered in the store. Because of this it was not possible for them to ensure the theft of
the most important file. According to the author Bonny, Goode & Lacey (2015) the
properly keeping and pre numbering of the files of research an development were not
numbered for this reason the accountant of the department was unable to keep a proper
documentation of the things.

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 The key business cycles were not properly defined – The mangers and the owners of the
department do not find it necessary to prepare policies and procedure in defining the key
business process. Creating a proper flowchart an algorithm helps the organization to
keep a track of the records. The top level managers in The Jaguar Automobile Plant was
unable to do so therefore it occurred to be a fraud case. According to the author Hilliard
& Neidermeyer (2018) the business is known to have a different area which they need to
properly take care of and understand the importance of different cycle in the business. If
they had been a little more concern about the business cycles the fraud case would not
have occurred.
 Lack of control with the authorization and the transactions – The authorization in the
business documents should appear before the purchase of the material are made in the
business. Depending on the size of business the level of authority should be introduced
to the business. In the case of the Jaguar Automobile there was a lack of proper authority
to take care of the necessary information required to safe guard the business documents.
Due to the lack of proper authority in the business the employee fraud had appeared.
 No over sight and review of the documents – Accord8ing to the author Huber, Mui &
Maille (2015) the small business owners might get enough time to get in touch with the
day to day performance of the business operations and review the procedures which are
used in the daily business. The business owners should also give some time to take a
view of the financial documents and the procedure to maintain the documentation of the
business. As in the case of Jaguar Automobile Australia the top management was not
able to review the data properly which was the reason for the employee fraud.

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 Outdated or ineffective information system – Most of the small business organizations
run on the lean resources which are updated and spend most of the time in evaluating the
information system. Whereas in the case of Jaguar Automobile Australia the top
managers did not invest time in this area which added a lot of inefficiencies in the long
run. The business organization was lacking proper management of the documents. This
had therefore lead to employee fraud in the organization. The top management should
list the systems in the business and the key performances measures which is needed from
each department for the smooth flow of data nd information keeping in mind the security
of the data also.
 Lack of physical and logical security – According to the author the physical security of
the business assets and the resources are something if not taken proper case of might
lead to a loss of data and information. The access of the company resources and
confidential data should be given limited access to the employees. As in the case of
Jaguar Automobile Australia the research and development documents were given
access to one of the employee who leaked the information to the other external sources.
In this case the company should have protected the data with various types of securities
like passwords and firewalls (Mansor 2015).
As the employee fraud is a significant problem faced y the organizations of all
types, locations and size, few of the internal controls which can be
recommended to George’s business that could be implemented to minimize
the risks associated in the business are :
 Observing the behavior of the employees – The fraud people are often known to display a
different behavioral trait which will indicate te intention to commit the fraud. Therefore

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its is recommended to keep a close eye on the employees by the team leaders which will
help the manager to identify the potential fraud risk for any business. For example if an
employee is feeling a lack of appreciation from the boss he or she can perform an
employee fraud which will be a way of revenge to the organization.
 Making the employees aware and setting up proper reporting systems – According to the
author Kranacher & Rile (2019) the awareness affects the employees working in the
organization. The employees working in the organization should be well aware of the risk
policies which will include the type of fraud and the consequences which are associated
with them. Those who are thinking of committing a fraud case will be aware that the
management is keeping an eye on them. This will help reduce the fraud case in the
organization. If an employee of the organization finds it out that the any other employee
is performing any uncertain act then they can instantly report it to the official website
owned by the organization (Negyesi 2018).
 Implementing best internal control system – The internal controls are the plans which are
implemented to safeguard the company assets. It is the process of implementing new
program or policy which ill safe guard the information. Taking for the example of a
business organization which is known to have a single retailer, one cashier and one
manager to maintain the store. In this case there will be huge amount of fraud because
there is no one to recheck the procedure maintained. Therefore it s recommended that
there should be someone who will be responsible for tailing the information gathered.
 Proper documentation of information – The documentation is something which is used to
reduce the fraud. The things which are used by the organization to keep a record of the
procedures of the research and development should be documented properly.

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One-page extract of the procedures manual which could be implemented by
Susan to minimize the risk of this type of fraud occurring within his business.
 The organization should establish and communicate a Fraud Risk Management
program which will demonstrate the expectations of the board of the directors and the
senior management and the commitments in to high integrity and the ethical values
which will regard the management of fraud risk (Negyesi 2018).
 The organization should perform comprehensive risk assessments to identify the
specific fraud schemes and risk. The organizations should also evaluate the existing
fraud cases in the business.
 The organization should select, deploy band develop preventive and defective fraud
control activities which will mitigate the risk of fraud events. The organization will
have to present, function and communicate the Fraud Risk Managements programs in
a timely manner to the parties who are responsible to take corrective measures. This
should include the senior management, top management (Omar, Nawawi, & Puteh
Salin,2016).
 The organization should establish a proper communication process in order to
maintain the information about the potential fraud and will be able to deploy a
potential fraud case to be addressed in a timely manner.
Conclusion
In order to conclude it can be said that the organization should take care of the securities
and other important information. The companies can perform comprehensive risk assessments,

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deploy band develop preventive and defective fraud control activities and establish a proper
communication process in order to maintain the information about the potential fraud.

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