Abstract: A truck scale fraud occurred in Pratt Recycling recently. There was collusion between the scale operator and several peddlers. The operator overstated the net weight information on the weight tickets and would create fictitious weight tickets when no weighing had taken place. Pratt started to require more documentation from peddlers and updated an automated scale system. Moreover, Pratt strengthened its monitoring process and adopted other internal control methods. Also, Pratt gradually eliminated the practice of purchasing scrap from peddlers. The paper studies the fraud prevention and detection techniques Pratt can implement to combat fraud, such as automation of system, segregation of duties and scrutiny in vendor accounts. The paper concludes that strong internal controls and effective detection mechanism are critical for the company in reducing fraud risks and preventing future crimes.
I. Introduction
Pratt Industries is America’s 5th largest corrugated packaging company and the world’s largest privately held 100% recycled paper and packaging company. Its supply chain continues through a series of sheet plants, full-line of corrugated box factories and display facilities through …show more content…
Commissioner, T.C. Memo. 1997-27, the Internal Revenue Service disallowed 83 percent of the taxpayer’s cash purchases of scrap metal because the names of the sellers were missing from the receipts and the Service could not verify the transactions. The judge acknowledged that taxpayers are expected to maintain adequate records to substantiate their deductions. However, the judge cited Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir. 1930) and held that the taxpayer was entitled to include 95 percent of its calculation of cash scrap purchases. In Cohan it was held that when taxpayers do not have adequate records, but when the record suggests that they clearly incurred an offset to gross income, courts might estimate the offset based on the
I. Introduction
Pratt Industries is America’s 5th largest corrugated packaging company and the world’s largest privately held 100% recycled paper and packaging company. Its supply chain continues through a series of sheet plants, full-line of corrugated box factories and display facilities through …show more content…
Commissioner, T.C. Memo. 1997-27, the Internal Revenue Service disallowed 83 percent of the taxpayer’s cash purchases of scrap metal because the names of the sellers were missing from the receipts and the Service could not verify the transactions. The judge acknowledged that taxpayers are expected to maintain adequate records to substantiate their deductions. However, the judge cited Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir. 1930) and held that the taxpayer was entitled to include 95 percent of its calculation of cash scrap purchases. In Cohan it was held that when taxpayers do not have adequate records, but when the record suggests that they clearly incurred an offset to gross income, courts might estimate the offset based on the