PROBLEMS connect All applicable Problems are available in Connect. Problem 4-17

Question

PROBLEMS connect All applicable Problems are available in Connect. Problem 4-17 Using internal controls to restrict illegal or unethical behavior Required For each of the following fraudulent acts, describe one or more internal control procedures that could ave prevented (or helped prevent) the problems. a. Everyone in the office has noticed what a dedicated employee Carley Trap is. She never misses work, not even for a vacation. Trap is in charge of the petty cash fund. She transfers funds from the company's bank account to the petty cash account on an as-needed basis. During a surprise audit, the petty cash fund was found to contain fictitious receipts. Over a three-year period, Trap had used more than $4,000 of petty cash to pay for personal expenses. b. Doug Clampet was hired as the vice president of the manufacturing division of a corporation. His impressive resume listed a master's degree in business administration from a large state university and numerous collegiate awards and activities, when in fact Clampet had only a high school di ploma. In a short time, the company was in poor financial condition because of his inadequate knowledge and bad decisions Stone Manufacturing has good internal control over its manufacturing materials inventory. However, office supplies are kept on open shelves in the employee break room. The office supervisor has noticed that he is having to order paper, tape, staplers, and pens with increasing frequency

Explanation / Answer

a. Encouraging employees to go on leaves periodically and ensuring job rotation amongst employees would have prevented or helped prevent the fraudulent siphoning off of the petty cash funds.

b. Conducting background, educational and academic verification of credentials of all employees joining the organization and reference checks would help identify any misrepresentations made by employees and thereby help prevent further problems in the organization.

c. Ensuring safe custody of all assets of the organization including office supplies by keeping the same physically secured and by establishing responsibility for safe keeping of the same will help prevent pilferage.

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