ETHICAL ISSUES RELATED TO PAYROLL AND FIXED ASSETS PROCESSES (STUDY OBJECTIVE 8)

images Chapter 9 presented ethics issues related to expenditure processes, such as those involving the traditional systems of purchasing and cash disbursements. This chapter examines additional issues specific to the payroll and fixed assets processes.

The payroll system is the target of several types of fraud schemes. The most common means of defrauding a company involves dishonest employees' falsification of time sheets in an effort to receive excess compensation. There are many different ways that these frauds may be carried out. The following list presents some of the typical sources of time sheet falsifications:

  • Exaggeration of hours worked
  • Falsification of overtime or holiday time worked, payable at higher rates
  • Falsification of sales in order to increase commission payouts
  • Overstatement of job-related expenses, which may be reported with the time sheets and reimbursed via the paycheck.

Other types of time sheet falsification may be carried out in the employee's effort to unfairly take time off work. Many companies have certain conditions under which they pay their employees for absences due to illness, disability, personal hardships, or vacations. Dishonest employees may take advantage of these policies in order to receive excess paid leave. For example, an employee may falsely call in sick or lie ...

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