Clear Voice Company, a communications equipment manufacturer,recently fell victim to a fraud scheme developed by one of itsemployees. To understand the scheme, it is necessary to reviewClear Voice's procedures for the purchase of services.
The purchasing agent is responsible forordering services (such as repairs to a photocopy machine or officecleaning) after receiving a service requisition from an authorizedmanager. However, since no tangible goods are delivered, areceiving report is not prepared. When the AccountingDepartment receives an invoice billing Clear Voice for a servicecall, the accounts payable clerk calls the manager who requestedthe service in order to verify that it was performed.
The fraud scheme involves Dana Foley,the manager of plant and facilities. Dana arranged fro heruncle's company, Foley Industrial Supply and Service, to beplaced on Clear Voice's approved vendor list. Dana didnot disclose the family relationship.
On several occasions, Dana would submita requisition for services to be provided by Foley IndustrialSupply and Service. However, the service requested was reallynot needed, and it was never performed. Foley would bill ClearVoice for the service and split the cash payment withDana.
Explain what changes should be made to ClearVoice's procedures for ordering and paying for services inorder to prevent such occurrences in the future.