A NEW INSURANCE AGENT WAS depositing his collections to the company's trust account -- a central repository used by all agents in the state. Collections were deposited daily and credited to the policies of those insured. Because the new agent did not understand the breadth of the account, he was surprised to find that his deposit receipt showed an account balance of more than $900,000.
The agent couldn't resist the opportunity for personal gain. He decided to withdraw the entire balance and transfer it to another bank. After completing a counter withdrawal slip, he requested a cashier's check for the full amount. Because there was no block on the account to prevent miscellaneous withdrawals, the cashier was able to complete the transaction without any trouble.
The agent, now almost a millionaire, couldn't believe how easily the company's system could be exploited. He was unaware, however, that the firm's internal control mechanism was already at work. A daily reconciliation listing at the insurance company noted the withdrawal, and internal auditing was immediately notified.
The auditors visited the agent the next day. When they confronted him with evidence of the misdeed, he confessed to draining the account and then using the cash to purchase certificates of deposit (CDs). He agreed to return the CDs and to pay the bank's penalty fee for early withdrawal.
Because the amount stolen had exceeded $500,000, the company was required to notify the U.S. Federal Bureau of Investigation. The agent was eventually sentenced to four years' probation. The last thing the internal auditors remember him saying is, "My wife is really going to be mad at me when she finds out about this one."
COMMISSIONS OUT OF CONTROL
The auditor was asked to participate in an assignment away from her office to help the audit department at one of the company's satellite branch locations. A significant fraud had been uncovered, and the department was looking for assistance with its investigation.
The on-loan auditor was asked to recalculate commissions paid to independent sales personnel and their supervisors. Her work involved manual recalculations from months of microfiche records and was limited to checking only the commission totals; she was not responsible for tracing the origins or history of the transactions.
At one point during the auditor's review, one of her clients mentioned that "anyone" can issue a manual commission. Troubled by this discovery...