Business Processes orporation manu factures small tools such as hammers and scre

Question

Business Processes orporation manu factures small tools such as hammers and screwdrivers. Many of LCK's enm pocket some of the firm's manufactured tools for their personal use. Since the ties taken by any one employee were typically immaterial, the individual employes did not consider their actions detrimental to LCK. As the company grew larger, man- agement instituted an internal audit department. The internal auditor charted gross profit percentages for particular tools and discovered higher gross profit rates for tools related to industrial use than for personal use. Subsequent investigation uncovered the 10. Internal control analysis. (CMA adapted, December 1992) LCK C quanti fraudulent acts. As an internal auditor, what steps would you take to uncover the fraud? What addi- tional internal controls should LCK Corporation occurring in the future? institute to prevent this problem from 11. Terminology. Please match qogh i

Explanation / Answer

Internal Controls:

CCTV camera survelliance

Storekeeper maintaining a store ledger or store book

Employees using tools should sign the store ledger

There should be proper tracking mechanism

Creating awareness in employees of maintaining proper conduct in workspace

Punitive action on employees when caught redhanded.

Steps to be taken by Internal auditor:

Check the stores/loose tools ledger and relevant employee signatures in issue and deposit columns.

CCTV footage on sample basis

Come on surprise visit to discover how employees are using small tools

Maintain the value of small tools/loose tools and make a stock taking on intervals

Question some employees on how they use small tools.

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