Chapter 3 PAYROLL AND EXPENSE REIMBURSEMENT CYCLES

LEARNING OBJECTIVES

After completing this section, you should be able to do the following:

     Recall typical controls for the payroll and expense reimbursement cycles.

     Identify various forms (electronic and paper) used in the payroll and expense reimbursement cycles.

     Recall the processes in the payroll and expense reimbursement cycles.

     Identify various types of errors or fraud that can occur if the payroll and expense reimbursement cycles do not have adequate procedures or adequate segregation of duties.

INTRODUCTION

Previous course materials have addressed several types of disbursement frauds, such as those that involve the creation of fake vendors or those that employ various methods of check tampering. Disbursement frauds can also occur in the payroll and expense reimbursement systems.

The Association of Certified Fraud Examiners' “Report to the Nations on Occupational Fraud and Abuse 2016 Global Fraud Study”1 found that payroll and expense reimbursement frauds' median losses were $90,000 and $40,000 respectively. The median duration of these frauds was 24 months each. How could these frauds have occurred and lasted for so long without detection? It is most likely because the systems did not have adequate internal controls. It is important to address which internal controls should exist in a well-designed payroll and expense reimbursement system to decrease the likelihood of fraud. An example of ...

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