White collar crime: SCICAP credit union fraud

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Located in chariot (IOWA), USA, SCICAP Credit union was a small association that was chartered in 1968. It was formed to serve the needs of different municipal banking employees within rural regions of IOWA. Ten years after its launch with a total asset of $2 million and 828 members, the management hired Linda Lee Clark who subsequently led to the downfall of the company. Hired in 1978, Clark was fired in 2015 the period she embezzled more than $2.4 million from the union. This was more than the union’s total asset at a period. Mrs. Clark did well to fraud the assets of the credit union under the watch of other employees who included the CEO, Board of Directors and Supervisory Committee. She managed to maintain two sets of the book with the data of credit union in the processing system. She was the only employee with the access to the system. When other employees requested for access including the CEO of the Union, she did not grant the access. Whenever the management granted her vacation, she did not accept. Throughout her job for thirty-seven years, she did not miss a single day on the job. Out of the two databases that she maintained, one of them consisted all loan balances and deposits which the members could request to review on a monthly basis. The second database had fabricated information used in providing the necessary financial report to regulatory authorities and reports. The balances in the altered database were adjusted using the amount deducted from the accounts of customers. According to Franklin (2017), Mrs. Clerk was able to re-direct all the deposits of the account holders to her accounts and that of her children. She was redirecting an average of $60,000 per year. Since she had full control of the database, she fabricated the statements to provide overstated statement to customers which reflected what needed to be the balance. If any transaction caused the account to be insufficient as a result of low actual balance, she covered it up without the customer noticing that they have insufficient balance. The employees of the credit union, the board of directors and the supervisory committee were not able to uncover the fraud since they had no idea if there was any fraud being done in the union as they got required statement when required. The fraud was only known after Mrs. Clarks reported due to her age. She feared that she could die in prison the moment the fraud is discovered. She pleaded guilty to fraud and was sentenced to 30 years (Franklin, 2017).
Auditors, creditors, and investors could have detected the fraud by the use of internal controls. This is plans or programs implemented in safeguarding the assets of a company to ensure that there is integrity on the record. Alteration of the accounting record can be detected. Internal control of the database should be revised and monitored to ensure that they are effective and no fraud has been committed. Also, segregation of duties in this union resulted in the fraud committed. Considering that the access of the system was only granted to one employee, she was able to alter the records without being noticed by any other employee. If the Union had granted other officials such as the CEO the access to the database, the fraud could have been detected. Also, Auditors failed to scrutinize the system (Yu and Churyk, 2013). If this was done during the auditing, the fraudulent activities which she committed could be uncovered.
Auditors need to test all the data in a database of the company not only random samples. While the sampling used may be effective in detecting fraud that is consistent with the whole data, this is not the same case in all fraud activities. By nature, the fraudulent transactions in an organization are not random but occur on a well-established data. The transaction can fall within the boundaries of these standards and be not flagged. Also, use of sampling approach may not be able to fully establish control failures since it’s hard to estimate in a random (Yu and Churyk, 2013). Through the use of sampling procedure, the auditor can fail to notice small anomalies.
In this case, Mrs. Clark who committed the fraud reported herself to the authorities. After that, the National Credit Union Association took over the operation of the credit union. Using the evidence that she presented to the authority, the forensic specialist was able to establish that she maintained to books and had transferred more than $2.4 million to her accounts and that of her children (Yu and Churyk, 2013).
Also, auditors need to strengthen control over authorized controls and use continuous monitoring and auditing to test and validate the effectiveness of the firm’s control. Continuous and repetitive analysis for detection of fraud includes setting up a script which can run on the large volume of data for anomalies identification which occurs over time. This method improves the overall consistency, efficiency, and quality of the process of detecting fraud (Yu and Churyk, 2013). Creating of script helps in getting the periodic notification when there is the occurrence of the anomaly in the data.
In this case, the victim could not have taken any analysis since she committed the fraud with full knowledge. Reporting the case is the best thing she did though the union had lost its assets. However, this reduced the level of investigation conducted.

References
Franklin, M. (2017). “SCICAP Credit Union: A Theft of $2.7 Million over 37 Years”.
Business Education Innovation Journal, 9(1), 123-132.
Yu, S. C. and Churyk, N. T. (2013). “Are students ready for their future accounting careers?
Insights from observed perception gaps among employers, interns, and alumni”. Global Perspectives on Accounting Education, 70(1), 18-45.

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