FOR two years, salesman Ng Ting Hwa had a pretty good racket going.
The 32-year-old, who worked for a medical supply company, had one local customer pay him - with personal cheques and cash - millions of dollars for company products.
But on Monday, Ng was sentenced to 71/2 years' jail for pocketing almost $2 million that belonged to his firm, Molnlycke Health Care Asia-Pacific.
PREVENTING FRAUD
'It is a common practice to ensure that cheques are made to company's name and not to the sales representative.'
-AUDITOR TIMOTHY CHERN
Experts are calling the case a striking example of a company not following basic accounting procedures, and one that serves as a wake-up call to firms. It also appears to be an almost unprecedented set-up, according to a Straits Times check.
For two years, the importer of health products, Econworldwide Medical Group, made cheques out directly to Ng for 35 shipments of products like plasters. He kept much of that money for himself, frittering it away at casinos in Genting Highlands.
Econworldwide and Molnlycke declined to comment on the case or discuss their business procedures.
When contacted, auditor Timothy Chern expressed surprise that the cheques were addressed to Ng instead of his company.
'It is a common practice to ensure that cheques are made to the company's name and not to the sales representative. This is a basic practice to prevent fraud,' said Mr Chern, who works for real estate developer City Developments.
He said: 'This case serves as a reminder for all companies to put out an operations manual of the procedures employees have to abide regarding financial matters.'
Set-ups like Ng's appear to be extremely rare. The Straits Times spoke with 10 organisations and all said cheques must be addressed to the company. The arrangement prevents employees from taking money for themselves, they said.
Ms Cecilia Tan, vice-president of the finance department at Tangs, said: 'Our finance department will check to ensure that the cheque is issued in the correct company's name and the amount is correct before depositing it into the bank.'
Besides cashing in the cheques, Ng also used his company's sales and distribution software system to prepare invoices to document payment and delivery of goods.
Mr Chern said this goes against auditing practices. Most companies require one person to be in charge of cashing cheques and another to prepare invoices.
This provides another layer of control, he explained.
He said most companies also require two signatures as proof that payment has been received.
Also, there are many checks, such as signatures by heads of department and the general manager, to ensure that payment is made to the correct party.
This article was first published in The Straits Times on Jun 11, 2008
