and on what pages are they located? TC 4-4 Writing Assignment Internal control p
ID: 2329667 • Letter: A
Question
and on what pages are they located? TC 4-4 Writing Assignment Internal control procedures Sarah Johnson was a trusted employee of Evergreen Trust Bank. She was involved in everything. She worked as a teller, she accounted for the cash at the other teller windows, and she recorded many of the transactions in the accounting records. She was so loyal that she never would take a day off, even when she was really too sick to work. She routinely worked late to see that all the day's rk was posted into the accounting records. She would never take even a day's vacation because they might need her at the bank. Adam and Jammie, CPAs, were hired to perform an audit, the first complete audit that had been done in several years. Johnson seemed somewhat upset by the upcom audit. She said that everything had been properly accounted for and that the audit was a needless expense. When Adam and Jammie examined some of the bank's internal control procedures, it discovered problems. In fact, as the audit progressed, it became apparent that a large amount of cash s missing. Numerous adjustments had been made to customer accounts with credit memoran- dums, and many of the transactions had been posted several days late. In addition, there were nu merous cash payments for "office expenses." When the audit was complete, it was determined that more than $100,000 of funds was missing or improperly aossanted for. All fingers pointed to John- son. The bank's president, who was a close friend of Johnson, was bewildered. How could this type of thing happen at this bank? Required prevent this type of problem in the future. ATC 4-5 Ethical Dilemma I need just a little extra moue Prepare a writen memo to the bank president, outining the procedures that should be fol lowedtoExplanation / Answer
Seggregation of duties
The basic essential method to prevent any fraud is seggregating the duties. In the case, johanson was trusted employee and hence was allowed to do all work on her own. She was trusted with various activities of bank such as teller, counting cash at teller windows, recording transactions etc. There was only one person involvement. Seggregation of duties means to employ a one person for one activity in such a manner that activity of one person is checked by some another person while completing the task at hand. It reduces the chances of fraud as instead of one, now there are two persons involved in a process. In case, had been the person authorising payment and making such payment for office expenses and person recording the same hs been different, fraud could have been prevented.
Rotation and leaves
It is very important to rotate the jobs in a bank on frequent basis. The more time a person do the same work, more the chances of him being manipulating the records. In the case, sarah never took a leave or rotated her job. had she did that, and another person resumed her work in absence of her, the manipultion done by her could have been founded earlier by such employee. Hence its very important to grant leaves intentionally so that work can be checked by some other employee and rotation shall be made in future.
Frequent audits
Audits shall be made frequently or atleast one time in a year. This will keep check on employees as they know that at year end, auditor will come and check the records, hence it demotivates the employee to conduct frauds and even if they did and concelaed it, chances are high of being the fraud detected by auditors, hence any further frauds can be easily avoided. Nowadays concept of concurrent audit is also very common which allows the bank to employ a concurrent auditor who shall remain at bank site and conduct his audit concurrently that is at same time as transaction occurs.
Prosecution
The fraudster shall be prosecuted for the offence he made, and and future offence doer shall be prosecuted, such information shall be dismented to all the employees of organisations. This shall create a sense of danger and demotivate employess to conduct fraud.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.