The Fraud
Fake sales made by fraudster employees may go to a phony customer or a real one who is an accomplice. Those wheelbarrows (from our previous examples) could be "sold" to a fake landscaping company with a phony purchase order and invoice, and shipped right out of the warehouse to a storage facility the fraudster employee rented to receive them. The goods can later be sold for cash, the invoice voided, and the inventory record doctored. Or they could be shipped to a real landscaper who colludes with the crooked employee and pays him a bounty for the stolen goods. Or the crooked employee might be the accounts receivable bookkeeper, who could make the charge to the landscaper disappear from the books, or maybe even have him "return" the goods for a refund!
Or, an employee may be in a unique position to manipulate purchasing and receiving systems. Say this employee received a delivery of 100 wheelbarrows. He decides to cover up his planned theft of 10. So he logs 90 items on the receiving copy of the delivery papers (that go to the inventory clerk) and sends the payment copy to the bookkeeper showing 100 were received.
The Flaw
As we've seen time and time before, the reason these frauds happen is attributable to the lack of separation of duties, lack of supervision and lack of overall internal controls.
The Fix
At the risk of sounding like a broken record, a formal policy of separation of duties, strict supervision, voucher accounting and all relevant internal controls must exist and be enforced at all times.