A client heard through its hot line that John, the purchases journal clerk, peri
ID: 2422149 • Letter: A
Question
A client heard through its hot line that John, the purchases journal clerk, periodically enters fictitious acquisitions. After John creates a fictitious purchase, he notifies Alice, the accounts payable ledger clerk, so she can enter them in her ledger. When the payables are processed, the payment is mailed to the nonexistent supplier’s address, a post office box rented by John. John deposits the check in an account he opened in the nonexistent supplier’s name. Adapted from the CIA Examination.
1.Define fraud, fraud deterrence, fraud detection, and fraud investigation.
2.List four personal (as opposed to organizational) fraud symptoms, or red-flags, that indicate the possibility of fraud.Do not confine your answer to this example.
3.List two procedures you could follow to uncover John’s fraudulent behavior.
Explanation / Answer
Answer 1
Fraud - is basically gaining an unfair advantage by doing/acting dishonest .
Fraud Deterrence - is basically reference of proactiveness means identificaation and removal of vulnerabilities from the process which can be caused a fraud
Fraud detection - is the process for identifing factors of the frauds.
Fraud investigation - is a process which includes the identification of factors cuased fraud, quantification of impact, reporting and actionables etc.
Answer 2
1. Inventory shortages
2. Internal control weakness like absence of segregation of duty
3. Employee lifestyle symptoms - like spending more than normal capacity of that level
4. No leave, resistance to periodic rotations or transfers etc.
Answer 3.
1. Stock reconciliation - Stock as per book and physical stock will show the difference of fictitious acquisitions since there is no receipts of goods.
2. In the role of accounts payable (Alice) should verify the GRN(goods receipts of note) of each acquisition before entering in to payable ledger.
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