Z. Electronics Pvt. Ltd. filed a claim under an employee dishonesty insurance policy, which covers losses due to the dishonest acts of permanent employees. The company's business model required buyers to make advance pay

The Forensic Auditor should conduct the investigation in the following manner: Whether Ranjan is a permanent employee of the insured should be ascertained. This can be seen with the help of several documents, some of them being appointment letter, salary slips, bank transfers of salary to the bank account of Ranjan, PF remittance, HR record of employee etc. The Forensic Auditor first ascertained that Ranjan was a permanent employee of the insured. The Forensic Auditor then looked into the internal controls and Standard Operating Procedure 'SOP' to be followed in case of sale to a customer. The important sequences of events were as under: Purchase requisition from buyer was to be first received; Purchase requisition was to be approved by a senior officer. Where the goods worth ₹ 40 lakhs or above are dispatched, the approval of the Sales Manager was required, who was to check the rates as well as quantities involved. Approval matrix to be checked and whether the same was adhered. The Forensic Auditor found out that in the given case, the Sales manager had not given approval at all. The transaction was authorized only by the supervisor above Ranjan, who coaxed him to believe that he would get it ratified by the sales manager. Such ratifications have been done in the past, but this time it was not done. Since the SOPs have not been followed, it was a clear case of negligence on the part of the insured, consequent to which there will be no liability on the part of Insurance Company.