...small crabmeat processing company. The next thing I will do in this particular case will be to let the auditor finished the ongoing investigation without infringing on his independence. b- According to the accounting information systems overview, there are two levels of frauds: employee fraud and management fraud (p.98). After examining all the facts presented in this case and all four characters with their respective implications during these events, I believe that the embezzlement took place at an employee level and the perpetrator is Debbie Jones the office worker. Employee fraud or fraud by nonmanagement employee is generally design to convert cash or other assets to the employee’s personal benefit. The facts tell us that the customer’s check was stamped on the back with only the company’s name and city rather than the usual “for deposit only” company stamp, which is usually used on checks to be just deposited. With just the name and company’s address, the person who has deposited the check might have simply cash it. And when ask about it, Debbie said that she sometimes uses that stamp. Furthermore, the payment issued on May 10th is listed after the one issued on May 23rd and Debbie was sitting nearby the computer had the opportunity to access before calling Susan to show her the recorded entry. c- This is case of check tampering where the perpetrator has forged in some material way the check that was written to the profit of the organization. The lack of good internal control...
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...INTERNAL CONTROLS AND FRAUD PREVENTION IN NON-PROFIT ORGANIZATION WRITTEN BY DAVID SANNI Designed to provide information on key areas that can strengthen the internal control system of VI-MID-ISLAND SERVICE (VIMS) Submitted To VANESSA OLTMAN Faculty of Management Vancouver Island University Nanaimo, BC, Canada (Nov/15/2012) Table of Content 1.0 INTRODUCTION 3 2.0 NATURE OF FRAUD IN CANADIAN NON PROFIT ORGANIZATION 3 2.1 TYPE OF FRAUD IN NON PROFIT ORGANIZATIONS 3 2.2 PERPETRATORS OF FRAUD IN NON PROFIT ORGANIZATION 4 2.3 IMPACT OF FRAUD TO NON PROFIT ORGANIZATION 4 3.0 COMPREHENSIVE APROACHE TO REDUCE FRAUD 5 3.1 UNDERSTANDING INTERNAL CONTROL 5 3.2 BENEFIT OF INTERNAL CONTROL 5 3.3 LIMITATIONS OF INTERNAL CONTROL 6 3.4 CONTROL MEARSURES IN PREVENTING FRAUD 6 3.5 SUMMARY AND CONCLUSION……………………….………………….8 4.0 REFERENCE…… ……………………………………………………………9 1.0 INTRODUCTION The Canadian non profit sector has one of the largest populations in the world, accounting for over 7% GDP and creating 2 million full time jobs for Canadians. Further discoveries was made that 78% Canadians donates money to non profit Organization irrespective of all walks of life and income bracket. These donations are received to address core issues...
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...Case Study 2 Solution Date:-08/10/2014 LJB Company :- Internal control No | Particular | Page no | 1 | Introduction | 1 | 2 | Topic 1 Explanation | 1-2 | | Internal control requirement | | 3 | Topic 2 Explanation | 2-3 | | Internal control requirement | | 4 | Topic 3 Explanation | 3-4 | | Internal control requirement | | 5 | Summary of recommendation | 5 | 6 | conclusion | 6 | case study 2 solution Dear president of LJB Company, * If the LJB Company should decide to become a publicly traded company, a few internal controls should be implemented to comply with the Sarbanes-Oxley Act (SOX). Management will need to provide periodic quarterly reports to evaluate the effectiveness and reliability of LJB’s internal controls over financial reporting procedures. Management should certify the accuracy and fairness of presentation of their financial statements. Independent auditor(s) outside of LJB will need to attest to management’s assessment of said internal controls. Additionally, non-audit services between these two parties (LJB and said independent auditor) are prohibited. * There are a few internal control measures that LJB already has in effect and are better for it: the use of pre-numbered invoices by the accountant and your (the President’s) involvement in the approval and hiring process of new employees. I also recommend the purchase of the indelible ink machine as per the accountant’s request...
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...Regulations Introduce three governmental regulations that have assisted in the checks and balances of government trading. A. Introduce the three government regulations covering the Securities Acts of 1933 and 1934, The Foreign Corrupt Practices of Act of 1977 and finally Sarbanes-Oxley Act. B. Origin of Securities Acts of 1933 and 1933 (Beatty, Samuelson & Bredeson, 2013) C. Genesis of the enactment of The Foreign Corrupt Practices of 1977. D. Origin of Sarbanes-Oxley Act and its enactment (retrieving information from: https: www.soxlaw.com/introduction.htm) 11. Securities Acts of 1933 and 1934 A. Registration requirement includes the statement and prospectus B. Annual, Quarterly reports and Form 8-k C. Inside Trading D. Private Offerings E. Blue Sky Laws F. Antitrust (The Sherman Act, The Clayton Act, and The Robinson-Patman Act) 111. The Foreign Corrupt Practices Act (FCPA) of 1977 makes it illegal for an American businessperson to give anything of value to any foreign official in order to influence an official decision. A. Applicability of the Act B. Prohibitions under the Act C. Penalties for Violations of the Act 1. Criminal 2. Civil 3. others D. Defense under FCPA 1. Lawful payment 2. Bona fide expenditures E. Fraud/Scandal of the FCPA of 1977 1. Detection method 2. Importance of Early Detection 3. Big problems for small corporations/organizations 4. Types of fraud and who is involved 1V. Sarbanes Oxley Act A. The effects of Sarbanes-Oxley...
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...white collar crime. Provide specific examples to support your response. When Edwin Sutherland first began his study/analysis under the Traditional Summary Reporting System, there was a limited amount of information available on White Color Crime. The white-collar offenses that are measured are fraud, forgery/counterfeiting, embezzlement, and all other offenses. Because white-collar crimes are not Index crimes, the only information available on these offenses is arrest information, which includes age, sex, and race of the arrestee. Additionally, all other offenses arrest category is very limited in its ability to measure the white-collar offenses included in its counts. This is due to the inability to differentiate the white-collar offenses from the others that also fall in this category. Based upon the most recently published data from the FBI, the arrest rates for the offenses of embezzlement, fraud, and forgery/counterfeiting are much lower than the arrest rates for property, crime, or for total crimes in general. In order to assess the utility of using NIBRS to measure white-collar crime, a substantial, but not exhaustive, list of white-collar offenses and its classification under NIBRS is provided (see Appendix A). Based upon that analysis, the following UCR offenses could be considered white-collar crime: fraud, bribery, counterfeiting/forgery, embezzlement (all of which are Group A offenses),...
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...Assignment 1: Review of Business Fraud Tara Johnson Professor: Jim Ridilla, CPA ACC 564— Accounting Information Systems May 1, 2012 Assignment 1: Review of Business Fraud Compose a summary of the case. Include how the fraud was perpetrated, the characteristics of the perpetrator(s) who committed the fraud, the role the auditors had in the case, and the direct and indirect effects the incident had on the organization’s stakeholders (customers, vendors, employees, executive committee, and board of directors). In 2011 Bank of America suffered a data breach from within the company that cost Bank of America approximately $10 million. A former Bank of America employee provided confidential information to a criminal fraud ring. That data was then used to steal funds from 300 customers in California and other states in the western United States. The names, addresses, Social Security numbers, phone numbers, bank account numbers, driver’s license numbers, birth dates, email addresses, mother’s maiden names, PINs and account balances were among the information that was released. That information was ultimately used to open new accounts, order checks, and make other bank transactions without the customer’s knowledge. This incident decreased the amount of trust the customers had in the company. The fraudsters were engaging in this activity for nearly a year and it should have been detected sooner. This fraudulent activity directly and indirectly affected it stakeholders...
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...REPORT TO THE NATIONS O N O C C U PAT I O N A L F R A U D A N D A B U S E 2012 GLOBAL FRAUD STUDY Letter from the President & CEO More than 15 years ago, the ACFE’s founder and Chairman, Dr. Joseph T. Wells, CFE, CPA, conceptualized a groundbreaking research project to study the costs, methodologies and perpetrators of fraud within organizations. The result was the 1996 publication of the ACFE’s first Report to the Nation on Occupational Fraud and Abuse. Since then, we have released six additional Reports that have each expanded our knowledge and understanding of the tremendous financial impact occupational fraud and abuse has on businesses and organizations. We are proud to say that the information contained in the original Report and its successors has become the most authoritative and widely quoted body of research on occupational fraud. The data presented in our 2012 Report is based on 1,388 cases of occupational fraud that were reported by the Certified Fraud Examiners (CFEs) who investigated them. These offenses occurred in nearly 100 countries on six continents, offering readers a view into the global nature of occupational fraud. As in previous years, what is perhaps most striking about the data we gathered is how consistent the patterns of fraud are around the globe and over time. We believe this consistency reaffirms the value of our research efforts and the reliability of our findings as truly representative of the characteristics of occupational fraudsters...
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...Case Study 2 ACCT 504 Group A December 2, 2012 LJB Company Internal Controls Evaluation For the President of the company Prepared by Group A Accounting Firm December 2, 2012 Table of Contents: I. Introduction – Stating the Issue II. Body of the Report – LBJ Company Findings and Analysis III. Summary and Conclusions – Findings Communicated to the President and Recommendations IV. Work Cited – References to support Recommendations Introduction: The purpose of this document is to discuss the internal controls and why the principle activities are important for a business to operate effectively. Our goal is to make the necessary recommendations and evaluate the system for future planning. We hope to uncover any issues that will prevent the company’s productivity. We’ll submit our recommendations to correct and improve the current system in place. In conclusion we’ll present our analysis to the President along with the recommendations needed to implement a better system of internal control. Issues: There’s an issue with too much responsibility placed on one employee. The accountant serving as the controller and treasurer creates a problem with documentation as you don’t have anyone to verify cash and revenue is accounted for correctly. It’s too easy for one employee to manipulate the books in his favor without a clear segregation of duties. The accountant is leaving checks in his office during the week exposing sensitive information and increasing...
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...Prepared For ACCT405: Financial Accounting Instructor Tim Vantuyl 6/8/2014 Case Study 2: LBJ Company Internal Control Assessment By Brian Tucker Student ID D40318643 Table of Contents Preface …..3-5 Body of Report Page …..6 Objectives of Internal Control …..6 Components of Internal Control …..6 Strengths …..7-8 Weaknesses Summary and Conclusion Preface With its introduction in 2002 the Sarbanes Oxley Act was meant to slow and detour the accounting infractions and criminal acts of recent companies like Enron, Arthur Anderson, World Com. SOX has changed the landscape of regulations as it relates to the role of corporate governance in overseeing and verifying the internal function and financial practice of reporting for publicly traded companies. The U.S. Securities and Exchange Commission to mean “controls that pertain to the preparation of financial statements for external purposes that are fairly presented in conformity with generally accepted accounting principles as addressed by the Codification of Statements on Auditing Standards §319 or any superseding definition or other literature that is issued or adopted by the Public Company Accounting Oversight Board” (http://www.sec.gov/rules/final/33-8238.htm). In reviewing the major changes by select sections, leadership and management of the firms should note the following as significant: Section 302 requires officer of the company to review and certify financial reports that the firm generates. They...
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...BILTRITE BICYCLES INC. CASE STUDY 2 MODULE II 1. Biltrite’s strengths and weaknesses in the internal control Assertion Sale Processing Flowchart: Weakness A. The office was uninformed about the credit approval - Valuation B. Missing customer information and product validation - Valuation C. Invoices were mailed before shipping the goods - Existence And does not matched with bill of lading D. Bill of ladings are not pre numbered - Completeness Strength Good internal control for receivables aging analysis and Follow up of delinquent accounts. Cash Receipts Processing Flowchart: Weakness E. Unrestricted customer check endorsement - Valuation F. Unable to edit and apply discounts and correct net amount - Valuation Purchases and Accounts Payable: Weakness G. Need approval for the prepared voucher for proper -Valuation Account distribution Strengths H. Verifies details on goods received with the receiving report I. Matching control tape with purchase summary for the processed invoices Payment Processing Flowchart: Strengths J. Matching the checks with the documents, amount and remittance details K. Checks are reviewed before signing for approval. L. Cancelled checks/documents to avoid duplication. M. Mailed check directly to vendors after signing the checks. Biltrite’s strengths and weaknesses in the internal control Assertion Payroll Processing Flowchart: Weakness ...
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...CHAPTER 19 Fraud Awareness Auditing LEARNING OBJECTIVES | | | | | | |Review Checkpoints |Exercises Problems |Cases | | | | | | |1. Define and explain the differences among several kinds of fraud, |1, 2, 3 |45, 46 | | |errors, irregularities, and illegal acts that might occur in an | | | | |organization. | | | | | | | | | |2. Explain the various auditing standards regarding external, internal, |4, 5, 6, 7, 8 | | | |and governmental auditors' responsibilities with respect to detecting | | | | |and reporting errors, irregularities, and illegal...
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...Summary The “Unearthing Pharma Fraud” article discusses the case of Rew Cook who is the sales manager at Good Health Inc. (GHI). The firm distributes pharmaceutical products and medical/dental equipment to pharmacies in France. An audit by the outsourced internal audit firm Alan & Blanche revealed fraudulent activity in Cook’s sales department. Cook took advantage of the internal control weaknesses present in GHI operations and was able to make a personal gain to the tune of $200,000. Cook’s main fraud was a result of keeping pharmacies in the dark in regards to the rules associated with bonuses and promotional products from hitting targets. This way Cook could favor the pharmacy of his choice, and in return would accept kickbacks from favoring particular pharmacies. Also due to pushing high sales, without netting in sales returns, he was not only able to receive higher commissions based on inflated sales, but also create a name for himself that he could use to ignore many rules, specifically HR policies. Control Weaknesses There were many kinds of control weaknesses in the “Unearthing Pharma Fraud” Case; the first, limited controls related to the control environment. With no processes set to interview employees who left the division or the company, in order to review employee performance or management performance. No controls were set to prevent management override, as Cook hired clerks, on company payroll without HR knowledge. Another lack of control was...
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...information. In order to do so, an employee has to have access to the payroll records. Timesheets and wage rates are then submitted or set in the payroll system. A paycheck is then issued to the ghost employee after passing the supervisor’s approval of payments. Lastly, a check or electronic deposit is received by the fraudster, or accomplice, and converted for their use. The potential loss to the victim organization of a ghost employee scheme could be enormous due to the recurring nature of the theft. After the perpetrator has successfully created a ghost employee in the payroll system, the process of issuing paychecks ensures a steady stream of funds to the fraudster. Joseph T. Wells’ article, “Keep Ghosts off the Payroll,” explains how Turner, a payroll specialist, almost got away with creating ghost employees. By simply peering over the shoulder of a co-worker, Turner gained access to the login information to the payroll system. Turner then added a couple of phony employees to the system, entered a false wage statement, and arranged for their payments to be directly deposited into his account. He then prepared a fake payroll summary to be signed by a supervisor. Additionally, Turner made filing copies of the checks on white paper, unlike the yellow paper...
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...Summary Taking from the Givers Taking from the Givers discusses cases of fraud in humanitarian organizations. Just as any organization, these organizations are also prone to the usual internal control problems which may lead to cases of fraud. The author of this article, Krishna Menon, has worked as an auditor at an international humanitarian organization and has conducted audits in several countries such as Sudan, Kenya, and Nigeria. Krishna discusses a fraud case which she has worked on where “Sam”, the financial assistant for an international humanitarian organization conspired with a bank employee to supply himself with some extra money amounting to $120,000 in three years. According to her, there were many red flags such as the fact that frequent payments were being charged to payables and many payment vouchers for disbursing these allowances weren’t available in the monthly box files containing vouchers and couldn’t be traced. Moreover, when Sam was called for questioning he would constantly be unavailable. When they finally did meet him, there were signs that something funny was going on. Sam had the latest phones and other expensive toys which each cost more than his monthly salary. The review conducted showed that many of the procedures weren’t carried out as per the organization’s policies and instructions. For example; the office was using several checkbooks, a large number of checks weren’t in the name of the payee, bank reconciliations were not satisfactorily performed...
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...AN EVALUATION OF THE INTERNAL CONTROLS SYSTEM FOR CASH FOR THE CASE OF NAIROBI SMALL BUSINESSES BY CLEOPHAS MUSINGA A Management Research Project Submitted In Partial Fulfillment For The Requirements Of The Award Of Bachelor Of Commerce (BCOM), School Of Business, University Of Nairobi JULY, 2008 DECLARATION This research project is our own original work and has not been submitted for academic purposes in any institution of higher leaning. Name Number Sign CLEOPHAS MUSINGA D33/6646/05 ………………………….. This research project has been submitted for examination with my approval as the university supervisor Signed……………………………. Date…………………………………………. Mr. Abdulatif Essajee Lecturer University of Nairobi TABLE OF CONTENTS DECLARATION i CHAPTER ONE 1 INTRODUCTION 1 1.1 Background of the study 1 1.2 Statement of the problem 5 1.3 Objectives of the study 6 1.4 Research questions 6 1.5 Scope of the study 6 1.6 Justification of the study 7 CHAPTER TWO 9 LITERARURE REVIEW 9 2.1 Evolution of internal controls 9 2.2 Components of Internal Controls 12 2.4 Relationship between a firm’s age and internal control 18 2.6 Internal controls in small businesses 19 CHAPTER THREE 21 RESEARCH METHODOLOGY 21 3.1 Research design 21 3.2 Population 21 3.3 Sample and Sampling Technique 21 3.4 Data collection methods 22 3.5 Data analysis 22 CHAPTER FOUR 23 DATA ANALYSIS AND FINDINGS 23 4.1 Introduction...
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