Leave a Comment:
(9) comments
Another control would be to run analytics on disbursement so looking for an unusual number of voids then look into the reason for the voids
Reply
Who was reconciling the checking account? Did they not notice (foolish me) that voided checks were clearing and outstanding checks for the same amount were still outstanding? Or was Jenkins also reconciling the bank accounts.
Reply
What about check 21? As an auditor, we are lucky if there is even a blurry, tiny copy of a check to look at. Only the front, no back of the check for signature comparison or account numbers. You can’t rely solely on the bank reconciliation process to catch this kind of thing. Someone who knows the business should be looking at vendors, and wondering why they are getting paid so much. Bank Recs are always an easy recommendation, but there are other indicators to look at.
Reply Betty, I so examined cleared checks, but, yes, I can’t see the back of the checks, though, on occasion, I have requested the backs of checks. Without seeing the payee on the cleared check, this type of fraud is always a possibility. I agree that “looking at vendors, and wondering why they are getting paid so much” is a good step.
Reply David, good question. The articles I read about this theft did not disclose who was reconciling the account, but I got the impression Jenkins was reconciling. Otherwise, someone would have (should have) noticed the scheme earlier.
Reply
Since its a brief article, it does not say how large a bakery it was or how long the fraud went undetected, but one basic question seems to hit me as follows: Where was the CFO or the Owners and how come they did not sense anything amiss? We dont need process level controls of cleared check payees, since hiding such a huge amount in the books is next to impossible. It would have to show up as a big distortion in the overall numbers or ratios and just a few simple analytics by a CFO or the Auditor should have got the alarm bells ringing.
Reply The FBI article (https://www.fbi.gov/contact-us/field-offices/dallas/news/press-releases/former-collin-street-bakery-executive-and-wife-sentenced) says Mr. Jenkins become the controller in 1998. Usually, in these types of cases, the fraudster is taking money over a period of time, so the effect is less pronounced. I think of Rita Crundell who stole $53 million from a small city; she did so over a 20 year period. I had the same thought in reference to her fraud. How can someone steal that much money without notice?
But, yes, I agree with your point.
Reply
Since Collin Street Bakery is a family owned business in a small-ish town, everyone trusted everyone. Mr. Jenkins was reconciling the bank accounts himself and had made up stories to tell his staff about missing checks (the “voided checks”). The money was taken over a long period of time. Mr. Jenkins also had stories about inheriting money so that explained how he went from living modestly to a higher standard of living. Agree that the CFO should have noticed. This was discovered when an employee decided to reconcile the bank account while Mr. Jenkins was out-of-town.
Reply
