Question

Ron Harbinger, a certified public accountant, has worked for the past eight years as a payroll clerk for Southeast Industries, a small furniture-manufacturing firm in the Northeast. Ron recently experienced unfortunate circumstances. His teenage son required major heart surgery and the medical bills not covered by Ron's insurance have financially strained his family. Ron is a hard worker and a model employee. Although he received regular performance raises during his first few years at the company, Ron's wages have not increased in the past three years. He recently asked his supervisor, Jesse Johnson, for a raise. While Jesse agreed that Ron deserved a raise, Jesse told Ron that he could not currently approve of one because of “sluggish sales.” Ron returned to his accounting duties while the financial pressures in his life continued. Two weeks later, when a salesperson, Laura Lumphouse, quit over a dispute with management, Ron came up with a plan. Since he processed employee terminations, time card approval, and paycheck distribution, Ron decided to delay Ms. Lumphouse's termination, then forge the time cards with her signature and cash her checks for himself. (Since he distributes the paychecks every two weeks no one would find out anyway.) In fact, no one ever discovered his scheme and Ron continued the practice for a full year, “earning” Ron an extra $90,000. 1. How does Ron's scheme affect Southeast's balance sheet (specifically Cash and Retained Earnings) for the year? Ignore income taxes. 2. How does Ron's scheme to continue to pay Laura affect the income statement (specifically Revenues, Expenses and Net Income)? 3. Use the fraud triangle from Chapter 4 to first identify the three elements of the fraud triangle and to explain how Ron violated each of these elements. Write two sentences per fraud element. 4.What internal controls could have been put in place to prevent Ron's paycheck scheme in the first place? (Don't make these up: use specific internal controls outlined in Chapter 4) Required: Answer the questions 1-4 (above) by Sunday evening then reply (thoughtfully) to two other students by the time the post closes on Tuesday night. Be sure answer in complete sentences and fully cite any references used (including page numbers or url). See Rubric for grading details. All posts will be graded for content, spelling and grammar. Suggested word count: 400- 600 words.

Answer 1