When does employee fraud occur? It is commonly accepted that the presence of the three elements of the “Fraud Triangle” increases the risk of employee fraud: Motivation: The employee is somehow motivated to commit a fraud. Economic factors such as personal financial distress‚ substance abuse‚ gambling‚ overspending‚ or other similar addictive behaviors may provide motivation. The current national economic recession may serve to increase the incidence of such financial motivations. Opportunity:
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Internal Control and Risk Evaluation A risk is the chance of a negative event occurring. Internal controls are policies and procedures set in place to reduce the occurrence of an associated risk. Risks are never entirely eliminated; however‚ internal controls help reduce the occurrence and balance the risk. This brief will discuss the risks of Kudler Fine Food’s current Accounting Information System (AIS). In addition‚ the internal controls designed to mitigate the risks. Furthermore
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Revenue Cycle and Control Activities The revenue cycle for many companies is considered the primary source to earn revenue from the sale of goods or service. Good controls must be established to maintain the effectiveness of receivables and credit sales‚ not doing so can harm the company and might be costly to the business. Six classes of internal controls guides us in evaluating and designing transaction processing. They are authorization‚ supervision‚ segregation of duties‚ access control‚ independent
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Net 5‚900 4‚300 3‚900 Bad Debt Expense 175 135 105 Accounts Receivable Written Off 165 125 100 Required 1. Calculate the following ratios for 20x9‚ 20x8 and 20x7: a. Sales to total assets b. Sales to production c. Revenue per unit sold d. Accounts receivable growth to sales growth e. Uncollectable accounts expense to net credit sales f. Uncollectable accounts expense to accounts receivable written off g. Accounts receivable turn days 2. a. Describe the implications of the resulting ratios for the
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Acquisition and Payment Documentation Test of control or Substantive S T of T Existence N/A 3.Inventory and Warehousing Analytical procedure Substantive A P N/A Realizable value 4.Capital Acquisition and Repayment Confirmation Substantive T D of B N/A Existence Accuracy Presentation and disclosure 5. Acquisition and Payment Reperformance Substantive T D of B N/A Detail tie-in 6. Acquisition and Payment Documentation Substantive T D of B N/A Cutoff 7. Sales and Collection Inquiry Substantive T D of B
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Management’s personal financial situation is threatened 2. Opportunity to carry out the fraud a) Nature of the Industry or entity’s operations b) Complex or unstable organizational structure c) Ineffective monitoring of management d) Deficient internal control 3. Attitude or rationalization to justify fraud a) Nonfinancial management’s excessive participation in selection of accounting principles and estimates b) Excessive interest by management in stock prices and earning trends c) Committing to aggressive
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company was nearing critical. On more than one occasion Mrs. Levi had suspected Betty‚ a long term‚ reliable‚ employee for over twenty years‚ might be stealing from the company. Betty not only worked as a sales clerk‚ but she also handled all of the cash and bank deposits and maintained all of the sales and cash receipts records. She had unrestricted access to all of the cash. Mr. Levi and their son‚ Alvin‚ who also worked in the business‚ disregarded Mrs. Levi’s suspicions. When she went to her accountant
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| |This report has been prepared to cover the assessment requirements of AAT Learning and Assessment Area ‘Internal Control and Accounting Systems.’ | |The objectives of this report are to: | |a)analyse accounting system and effectiveness of its internal control | |b) to identify the strengths and weaknesses
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Audit Planning: Assessment of Control Risk MULTIPLE CHOICE: 1. Which of the following is ordinarily considered a test of internal control procedures? a. Send confirmation letters to banks. b. Count and list cash on hand. c. Examine signatures on checks. d. Obtain or prepare reconciliations of bank accounts as of the balance sheet date. ANSWER: C 2
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Virginia. In the Goodner case‚ internal auditors were conducting their annual inventory counts of Goodner Brothers‚ Inc. and determined that their numbers were lower than the book inventory numbers by $143‚000. As it would with any company‚ the misstatement of inventory raised red flags forcing the company to contact their independent audit firm to investigate the inventory shortage. The investigation concluded that the company did not have adequate internal controls and that many issues involving
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