Question

In: Accounting

Various Types of Forensic and Non-forensic Audits Case 1 Jacob Kent is the general manager of...

Various Types of Forensic and Non-forensic Audits

Case 1

Jacob Kent is the general manager of a large locally-owned garden center in Columbus. The store has four departments, each with its own department manager.

Each department has its own sales counter, and two salespersons are assigned to each counter. The salesperson enters his or her own PIN for each transaction. At the end of the day, the manager in each department totals the department’s sales, retrieves the cash and checks from the register, and prepares a deposit slip for the general manager to review and sign. The general manager re-checks the cash count and then signs the deposit slips and accounting documents.

When the general manager receives the cash receipts from all departments, he prepares a sales report and sends it to the store’s controller. The controller counts the money and signs three copies of the sales report. One copy is for her, one copy goes to the store accountant, and the final copy goes to the store manager. The controller then puts all the cash into the safe until it is picked up for delivery to the bank.

The store accountant reconciles copies of sales reports with bank deposit slips and the bank statement.

Jacob has a long relationship with the bank. The bank just called to suggest that he checks into some customers' checks that had recently been returned for non-sufficient funds. According to the bank, some of the payers had written bad checks to other local businesses.

The bank suggested that the garden center may have an employee working against it. A police investigator told the bank that in similar cases an insider is involved.

1.What possible check fraud schemes might the company be a victim of? What control processes could be implemented to detect and deter them?

2.Given the store’s procedures for processing cash receipts, which store employees might be in a position to participate in a check fraud scheme?

Solutions

Expert Solution

  1. What possible check fraud schemes might the company be a victim of?

Fraud essentially involves an act or acts of deception to dishonestly make a personal gain for oneself and/or create a loss for another, either in cash or kind or by avoiding an obligation.

The fraudster has:

An intention to deceive, and

An objective to influence the victim’s decisions or actions.

Whether the fraudulent act involves a member of staff (or a relative), acting alone or in collusion with a third party (internal fraud) or merely any third party (external fraud)

Possible fraud which company be a victim of

Theft, embezzlement, forgery, misappropriation and money laundering.

  1. There might be collusion among employees and outsider (third party) who act as customer and render bad checks to the company.
  2. There may be a leading and lagging fraud by middle or top manager.

(in this one particular sales of a particular month hides and offset with next month reporting the same and get new one hide)

  1. Accepting or paying cash or check more than the limit authorized by the audit committee may be an indication of possible fraud.
  2. Protecting a particular customer or buyer or vendors may be an early indication of possible fraud involvement.

What control processes could be implemented to detect and deter them?

Below is the possible controls which should be implemented to detect and prevent the fraud.

  1. Rotation of employees within and across the department at a particular interval.
  2. Internal checks to be built in to the stand operating procedure whereby frauds might get early detected.
  3. Authorizing the limit upto which cash can be accepted or paid for any transactions.
  4. Random visit by audit team to the stores.
  5. Ensured to establish a process into which there must be one or two weeks lead time for shipment when you get any checks or advances.
  6. Get the bank verified document of customers and vendors.
  7. Promote and recognize the ombudsman within the company and reward them to create a good culture within the organization.

2. Given the store’s procedures for processing cash receipts, which store employees might be in a position to participate in a check fraud scheme?

In given stores procedure below is the employees might be involved and participate into Check fraud scheme.

  1. Stores sales manager may have a moderate level of involvement.
  2. Manager of the stores may have a greater chance of involvement.
  3. General manager in collusion with manager and in isolated

Related Solutions

Various Types of Forensic and Non-forensic Audits Case 2 Heather Lockard is the CFO of the...
Various Types of Forensic and Non-forensic Audits Case 2 Heather Lockard is the CFO of the Keel Company in Fort Lauderdale, Florida. The company is a privately-held manufacturer of custom recreational vehicles with about 175 workers (engineers, vehicle designers, mechanics, and so on), and nine employees in its main office. Heather’s primary responsibility is to prepare the financial statements. Two full-time accountants work for her. She follows GAAP in most cases, but she sometimes deviates from GAAP when she thinks...
Various Types of Forensic and Non-forensic Audits Case 3 A small biomedical company has had great...
Various Types of Forensic and Non-forensic Audits Case 3 A small biomedical company has had great success in the last four years and is now generating $75 million per year in sales. The company has only three employees, all siblings. Their strategy for success has involved leveraging a few valuable patents and outsourcing almost all business functions. The siblings are planning to take their company public with the hope of generating capital for expansion. Launching an IPO, however, will require...
What benefits does a forensic audit have over other types of audits in supporting a remedial...
What benefits does a forensic audit have over other types of audits in supporting a remedial action?
1. Outline and describe the various types and subtypes of arguments. 2. Define deductive and non-deductive...
1. Outline and describe the various types and subtypes of arguments. 2. Define deductive and non-deductive arguments. Which type of argument is stronger and why?
Case 1 – Cost-Volume-Profit Analysis Janet Jennings is the general manager for Mercashoe Store. She is...
Case 1 – Cost-Volume-Profit Analysis Janet Jennings is the general manager for Mercashoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $24,000 in fixed costs to the existing fixed costs. In addition, Janet is proposing a 5% price decrease ($40 to $38) that will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $24 per...
As a general rule, cities are non-profit organizations and elected officials operate them to provide various...
As a general rule, cities are non-profit organizations and elected officials operate them to provide various services (e.g., trash collection, street repair, etc.).[1] Suppose cities of all sizes across your state/province/region decide to privatize in the sense that they now are profit-seeking. Assume all cities are now corporations and will be run as such. They will issue stock, the stock will be traded on a national exchange (e.g., NYSE), they will have a board of directors which will appoint all...
1) Describe the general types of barriers.
Chapter 13 1) Describe the general types of barriers. 2) Competition keeps prices lower for consumers. So why do we have patent laws? 3) What is the relationship between the marginal revenue curve and the demand curve for a single-price monopolist? 4) "A profit-maximizing monopoly never produces an output in the inelastic range of its demand curve." True or false? Explain.  
1.         To gain the benefit of _______________, a bank makes various types of loans, to various...
1.         To gain the benefit of _______________, a bank makes various types of loans, to various types of borrowers. A.     guaranteed income B.      diversification C.      more firm-specific risk exposure D.     reduced operational risk E.      reduced off-balance-sheet risk 2.         Argentina unilaterally told its creditors in 2005 that it would henceforth repay only $0.30 for every $1.00 of its debt that was outstanding. Argentina’s creditors had been exposed to ______________ risk, which was then realized. A.     sovereign B.      operational C.      technology D.    ...
Case Analysis 3: You are the General Manager at the Bicker, Slaughter, and Lynch Law Firm....
Case Analysis 3: You are the General Manager at the Bicker, Slaughter, and Lynch Law Firm. There is an opportunity to buy out a small law firm that was just started by a young MBA/JD, and you believe the firm can be grown and become a lucrative part of your Firm. With help from your finance leader, you have estimated the following benefit streams for this new division: Before Tax Cash Flow From Operations Year 1 $(149,000) Year 2 $0...
Case F: Controlling Performance Management Jacob Victory 1. What is your interpretation of what happened in...
Case F: Controlling Performance Management Jacob Victory 1. What is your interpretation of what happened in this case? Assume for the moment that Josh was successful at improving performance and that this was why he was being transferred. The New Vice President “He is not a nurse,” smirked the pediatric nurse director. “He’s going to be a piece of cake,” mocked the other with mischief gleaming in her eye. They were referring to Josh Webber, their new boss who was...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT