Ghost Employees

659 Words Sep 21st, 2014 3 Pages
Ghost Employees

As long as a company has a payroll office, the risk of having a ghost employee exists. A ghost employee refers to someone, either real or fictitious, who is on the company’s payroll but does not actually work for the company. A ghost employee is most frequently a recently departed employee, a made-up person, or a friend or relative of the fraudster who created the employee.
There are a few steps that are taken in order for the ghost employee to be successfully added. First, the fraudster has to add the ghost employee to the payroll or, if it is a recently terminated employee, change their information. In order to do so, an employee has to have access to the payroll records. Timesheets and wage rates are then submitted
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Over the course of two years, Turner embezzled $112,000 altogether. Turner did not go to jail but he did get 15 years probation and had to make restitution.
Eddy, the partner auditor for the company stated, “The things people tell you or the documentation they give you isn’t necessarily true or authentic. If you accept everything at face value, you’re not doing your job as an auditor.” Auditors should have professional skepticism when performing an audit. Two simple tests can help an auditor expose ghost employee fraud schemes: running a report that detects all cases where employees have the same bank account, as well as a report that displays payments made to employees after their termination date.
Most ghost employee frauds originate with payroll personnel and are caused by weak internal controls. Simple measures on a company’s behalf can help prevent or detect many of these schemes. Companies can tighten their internal controls by ensuring the payroll preparation, disbursements, and distributions are segregated. They also can train employees to be cognitive of paychecks without deductions for taxes or Social Security. Companies should also occasionally hand-deliver paychecks to employees and require identification. Last but not least, be aware of labor costs higher than the budget amount. In all, both companies and auditors should be aware of such fraudulent acts in order to prevent or reveal

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