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Improving Internal Control to Curb White Collar Crime

NCJ Number
NATIONAL PUBLIC ACCOUNTANT Volume: 22 Dated: (September 1977) Pages: 11-16
D J Klein; M L Densmore
Date Published
6 pages
This paper, written for internal and independent auditors, focuses on white collar crime and suggests internal control procedures to reduce this type of crime.
One survey of crime's impact on industry estimates that the white collar crime rate is $40 billion per year, increasing 15-20 percent annually. According to recent studies, industry overlooks its losses by ignoring or rationalizing them, and refuses to believe that, under certain conditions, as much as 70 percent of a company's employees may steal. Moreover, 60 percent of dollar losses within a company are from employees on the administrative, managerial, or supervisory levels. Physical restraints, which can decrease theft significantly, are the easiest to initiate, but frequently the most costly. Included are normal security measures, inventory controls, and screening of new employees. Inventory control, a key anti-theft measure, includes (1) written records of every transaction; (2) complete end of month physical inventories; (3) periodic, 'spot' inventory checks; and (4) appropriate physical security of high-priced inventory. Organizational anti-theft measures, the least expensive but most difficult to implement, involves employee supervision and stringent accounting practices. In addition, managerial policies which separate responsibility for both transactions and records, and which correlate fringe benefits with honesty, or conversely with losses, deter employee theft. Footnotes are included.


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