C. Fraud Hypothesis I believe that asset misappropriation by accounts payable fraud is occurring at Wayland Manufacturing Company due to a lack of proper internal controls. Making the company’s Chief Accountant responsible for additional day-to-day functions provides him with opportunity to commit by creating fictitious vendors with his information and then creating fictitious invoices. Newbaker can then conceal his fraud by approving the invoices for payment. Employees working at an organization for more than five years are more likely to commit fraud. Therefore, Newbaker’s six-year history with the company has made him trustworthy and very knowledgeable, which could indicate involvement in asset misappropriation. The high employee turnover could represent a past fraudster leaving before getting caught or employees refusing to continue with the asset misappropriation. In addition, the varying monthly accounts payable transactions ranging from the lowest being April 2014 and …show more content…
Electronic confirmations are often used to verify bank balances, but they can also assist in the verification of a company’s vendors. Therefore, I am going to request confirmations from Wayland Manufacturing Company’s vendors after the client accepts my request. The electronic confirmations will prove each vendor’s existence as well as the accuracy of the accounts payable subsidiary ledger balances. Evidence collected from third-party sources must remain confidential and I maintain my integrity by only seeking evidence I am authorized to review. If I decide to request Cash electronic confirmations without consent, I am violating integrity, confidentiality, and professional due care (AU Section 330-The Confirmation Process 1998) (Arens, Elder, & Borsum 2013) (AICPA Code of Professional Conduct
During the Simply Soups, Inc. audit, we were responsible for confirming the balances for each of the company’s bank accounts. The purpose of sending confirmations is to obtain a reasonable expectation that the balances presented on the books reflect the actual values recorded by the banks, addressing any issues of existence. In addition to providing validation from a reliable source, confirmations also allow us to reconcile any issues concerning money in transit.
The ITGC regularly handle program changes, development, and access as well as basic computer operations. A poorly designed IT framework and accessibility protocols increase the company’s susceptibility to internal and external attacks, which result in the loss valuable financial information or its utilization to commit and conceal fraud. In asset misappropriation for example, an individual with access to the company’s accounting software has the opportunity to commit and conceal fraud. For example, Wayland Manufacturing Company’s accounting department oversees the maintenance of the Accounts Payable and Purchases general ledgers. Therefore, Newbaker is responsible for recording invoices and cash disbursements. Therefore, he has the accessibility to modify the company’s vendor list to include fictitious vendors that increase the likelihood of payment for fictitious invoices (Fraud Risk Assessment n.d.) (Eikel 2008) (Arens, Elder, & Borsum
Once the workers comprehend the business and how it works then they can assess the distinctive budgetary records as to if the enterprise is really doing and suspected. Be that as it may, on account of Nortel this would be troublesome as they were not precisely reporting their profit. This is the place the direction of discipline would have been viable so that when an association was observed to be dishonest then they would be issued a discipline or a fine to keep them working in a moral way. This would be the last need for cures as you can expect by then that the association has effectively accomplished something incorrectly or off base which is prompting the discipline. Through utilizing business instruction first you can permit representatives to completely comprehend the association and stop deceptive practices. This is finished by having the representatives screened and enlisted as moral individuals and additionally being prepared in morals. This prompts workers considering each other responsible for their activities and not enduring a dishonest domain or practices. Using the Code of Ethics and Code of Conduct workers can be considered responsible to make sure they are carrying on in a moral way. In the event that they are observed to mishandle this then they can be rebuffed. The organization can be controlled by assessing the monetary records furthermore
Fraudulent activities within a company can lead to its downfall and prosecution of those responsible for said fraud. More than 80% of fraud committed within an organization occurred within accounting, operations, sales, executive or senior management, customer service or purchasing according to an Association of Certified Fraud Examiners (ACFE) 2010 survey (Association of certified Fraud Examiners, 2010). In the case of Phar-Mor, the fraud was initiated by the Chief Operating Officer (COO), Mickey Monus, and supported by the Chief Financial Officer (CFO), Patrick Finn in response to declining profits of the company.
The Hollate Manufacturing case provided by Anti-Fraud Collaboration has well illustrated how several common issues in an organization contributed to the fraud’s occurrence. These issues can be categorized into two major groups: ethical culture (internal aspect) and internal control system (external aspect). By taking effective actions to enhance these two aspects, an organization can protect itself against the largest frauds, which result in financial and reputational damage.
In the case study of Pacific Acceptance Case, they established 10 principles and one of it was that whenever an auditor feels some suspicious activities, which may be because of some irregularities and which indicates towards some fraud, the auditor must take some action (Gay & Simnett 2010, p. 156). In our case study there was no action taken by the auditor even though they came to know that impulse was going through liquidity problems which was due reduction in inventory turnover and debtor turnover.
There are several important people involved with this project and will help with the necessary changes needed for the Payable Audit System (PAS). Each person has a very detailed job description and the skills that would be used to make the changes to the system. First, Ted Anderson the director of disbursement began to notice how their current system was very labor-intensive. He knew of other ways to increase the productivity to the system and he would help in the plan to transform these changes. First, he changed the mind-set of how the system would work, and he organized a difficult training course with a 9 month duration designed for the employees. With his role on this project the company will make several fundamental changes, to pay the invoices in their tolerance. Keeping all history transactions, they would adopt a quality-control approach. Also eliminating all their paper files they would develop a Document Control System (DCS), where they would scan all of their documents into their computer system.
May 18, 2007 had to be one of Brian Whitfield’s greatest moments of his life. A news conference held that day by the NHL’s Nashville Predators declared the name for the stadium as the Sommet Center (Brumley, 2007). Sommet (pronounced So-may) also happened to be Whitfield’s growing business. Whitfield was also a huge Predators fan, as he mentioned in a 2007 interview with the Nashville Business Journal, citing the Predators as on his three passions in life, along with spending time with family and traveling to new places. Sommet was making an impact on the growing field of small businesses outsourcing their non-revenue generating business functions such as human resources administration, payroll processing, insurance and
Embezzlement is financial fraud and is often executed in a way that is premeditated, systematic and/or methodical with the explicit intent to conceal the activities from other individuals, usually because it is being done without the other individuals’ knowledge or consent. Embezzlement “often involves the trusted individual embezzling only a small proportion of the total of the funds that he/she control in an attempt to minimize the risk of the detection of the misallocation of the funds or resources. When successful, embezzlements continue for years without detection. It is often only when a relatively large proportion of the funds are needed at one time or they are called upon for another use that the fraud is discovered (Wikipedia). This essay will present John F. Doorly’s and Minnie Mangum’s schemes as examples of embezzlement and discuss preventive measures.
These include functions in real estate (METRO properties), account processing (METRO Group Account processing, IT (METRO Systems), logistics (METRO Logistics), travel agency (METRO Group travel), purchasing (METRO Group Buying HK). insurance brokerage (METRO Group Insurance Broker), advertisement (METRO Group advertising) and facility management (METRO Group facility management). The wide ranging functions, valuable properties that the Group has put it at a high degree of risk and exposure to Fraud. Numerous individual occupying different positions and series of complicated transaction makes the Group a suitable case to study as various aspects of economics, management, law, sociology and organizational theory come into play to understand the processes for an effective design of fraud deterring schemes (Friederichs, 2010 p. 36). METRO Group diverse portfolio can provide a concrete, in-depth understanding of the dynamics and realities of a retail and consumers fraud cases but still applicable to other
Kachina Petroleum Equipment Co. should be held responsible for not formally reporting the fraud to the authorities. Management is responsible for the long-term success of the company and as such must act in the best interests of the company and ensure that the company’s assets are not misused or mismanaged. No company is immune to embezzlement, it is therefore important for management to report incidences of fraud to show that they are operating legally, ethically and transparently and is not engaged in conspiracy. While it can be argued that divulging too much information may put the company in a questionable light, not reporting the matter send a negative message to employees, stakeholders and customers when the scheme is eventually
There has a certain situation that will occur this opportunity such as monitoring of management is not effective, complex organisation structure, and internal control components are deficient. In Cendant case, the CUC made various adjustments to incorporate the misstatement into the general ledgers and this causes the opportunity to fraud happens.
Financial: A corrupt company will lose customer respect and trust, requiring that the company’s management spend valuable time and resources to keep their clientele loyal and demonstrate that they still operate a viable business. The public, overa...
The quantity of accounting fraud cases keeps on rising. Fraud is a consistent thing that will reliably be around, and in a bigger number of routes than just a single. An extensive apportion of organizations out there fight with fraud, either from within the organization, or from outside the organization. Knowing how to manage this is essential for an organization to be productive over a drawn out extended period of time. The investigation regarding the matter of accounting fraud will utilize sources from the web and the DeVry school library. The principle territory we are planning to address is accounting fraud and how it could impact an organization by answering, the who, what, when and how. Its goal is to increase the awareness
Damages done by the fraud to any organization can be huge if not prevented. The main role of internal auditors in an organization is the detection and then prevention of fraudulent activity that is why the organizations are paying for them. Some fraud activities have happened in the Ajax Export Corporation. The fraud is done by accounts payable clerk with a quantity of $18,000 by writing checks to herself and charging the expense to miscellaneous account/ expense. This process according to the examination has occurred over the period of three years. The issues which are addressed may have the following recommendations.