internal control Read the IMA Case, Lack of Internal Controls: Beaumont Independent School District, and choose one of the...

internal control
Read the IMA Case, Lack of Internal Controls: Beaumont Independent School District, and choose one of the following schemes:

Lack-of-Internal-Controls-Beaumont-Independent-School-District Case.pdf

Booster Club Fund

Medical Magnet Program tuition funds and student transcript fees,

Cash funds and scholarship donations,

Catering ad food service, and

Printing services provided by Brian Collins, BISD employee Patricia Adams Lambert’s son.

Answer the following questions for the scheme selected:

Use specific examples to identify weaknesses that existed in the internal control environment at BISD. Based on the identified weaknesses, what improvements to the control environment would you recommend?

List and discuss several control activities that could have been used by BISD to prevent and/or detect the misappropriation of funds perpetrated by Patricia Lambert. Pick more than one scenario, and discuss how the control activities would be applied in each scenario.

Do you think BISD has effectively identified risks surrounding purchases from vendors and cash receipts? Identify these risks, and suggest procedures that should be implemented in response to those risks

Post Requirements:

Solutions

Expert Solution

There are several weaknesses that exist in the internal control environment at BISD. Firstly there is a complete lack of control with regards to authorization of transactions. There are no levels of authority and hence Lambert is using this gap to get benefits from inappropriate spending. Secondly there is an absence of formal ethical policy and procedures. There are no clear guidelines with regards to integrity and ethics and as a result Lambert is continuing to unethically use the resources of BISD for her own personal purposes. In this case improvements are needed with regards to the control environment and control activities at BISD. The control environment refers to the policies and practices as put in place by the top management of a company. The control environment consists of organizational structure, management’s philosophy, HR policies etc. BISD has to make its structure more robust so that people like Lambert cannot use the organization for own personal gains. Secondly policies and procedures should be established to meet the objectives in an optimal manner.

The control activities that could have been used by BISD to prevent and/or detect the misappropriation of funds perpetrated by Patricia Lambert are authorization and approval and reconciliation and review. Take the scenario of Lambert drawing money from booster club account for personal purposes like buying clothes, accessories etc. If these transactions would have required authorization and approval from a higher level of authority then the funds would not have been misappropriated and misused. Secondly if there was reconciliation and review then the focus would have been on compliance, cross-checking of the transactions and records. This scrutiny would not have let Lambert to get away with the misappropriation of funds.

No, BISD has not effectively identified risks surrounding purchases from vendors and cash receipts. The risk is that of improper billing and recording of cash received. Procedures that should be implemented to counter these risks are that different eyes and different persons should check the entries made and the cash received. This will leave little room for manipulation for Brian who will not be able to mark up the invoiced prices any more.

ekkarill92 answered 7 months ago

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