Question

In: Accounting

(employees have the ability to access the accounting functions, preparing bank deposits and recording sales data.)...

(employees have the ability to access the accounting functions, preparing bank deposits and recording sales data.)
construe fraud and mention internal control measures using information given.

Solutions

Expert Solution

1. Accounting Functions- There are lot of fraud risks in accounting functions. Main risk is segregation of duties(SOD) risk.

a. If cash accounting duty is also held with the person who disburses the cash from bank account then there is a high segregation of duty risk which may result in fraud. Hence these duties should be segregated between two people.

b.Absence of SOD between invoice processing and payment processing leading to fraudulent transactions. The below control measure should be implemented

Invoice details are input in system by the invoice processing team who are responsible for entering the correct invoice details in the system. Once the input is made, information flows to the payment team for them to process the invoices for payments. Invoice team does not have access to bank sites to make or approve payment requests. Likewise the payments team does not have rights to make changes to the invoice information captured in the system.

2. Preparing bank deposits- The person who prepares bank deposit should not have access to approve the transaction in the bank account. If it is held with same person, then it might result in fraudulent transactions.

3.

a. Recording Sales Data- If the person accounting sales receipt is also responsible for approving bad debts or giving trade discounts then he might collude with customer and obtain an illegal benefit and approved bad debts in favor of him. So these responsibilities should always be segregated.

b. Any customer refunds should be properly reviewed by sales head and approved accordingly after ascertaining proper justification.

ekkarill92 answered 1 year ago
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