Which of the following data analysis procedures could have been used to detect this fraud?
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- A purchasing agent for a large hardware retailer hassole discretion in selecting vendors for the parts and supplies sold by the company. The agent directs a disproportionate number of purchase orders to a supply company owned by the agent’s brother- in-law, which charges above-market prices for its products. The agent’s relationship with the supplier is unknown to his employer. What type of Fraud is this? What controls can be implemented to prevent and detect this fraud?All-Around Sound Co. discovered a fraud whereby one of its front office administrative employees used company funds to purchase goods such as computers, digital cameras, and other electronic items for her own use. The fraud was discovered when employees noticed an increase in the frequency of deliveries from vendors and the use of unusual vendors. After some investigation, it was discovered that the employee would alter thedescription or change the quantity on an invoice in order to explain the cost on the bill.What general internal control weaknesses contributed to this fraud?The kickback is a form of fraud often associated with purchasing. Most organizations expect their purchasing agents to select the vendor that provides the best products at the lowest price. To influence the purchasing agent in his or her decision, vendors may grant the agent financial favors (cash, presents, football tickets, and so on). This activity can result in ordersbeing placed with vendors that supply inferior products or charge excessive prices.Required;i) Describe two preventive controls that an organization can employ to deal withkickbacks fraud ii) Describe two detective controls that an organization can employ to deal with kickbacksfraud iii) Describe two corrective controls that an organization can employ to deal with kickbacks fraud
- 2. FRAUD SCHEME PURCHASING AGENT A purchasing agent for a large hardware retailer has sole discretion in selecting vendors for the parts and supplies sold by the company. The agent directs a disproportionate number of purchase orders to a supply company owned by the agent's brother- in-law, which charges above-market prices for its products. The agent's relationship with the supplier is unknown to his employer. C ta th di Required What type of fraud is this, and what controls can be implemented to prevent or detect the fraud? Re a.A former chairman, CFO, and controller of Donnkenny, Inc., an appeal company that makes sportswear for Pierre Cardin and Victoria Jones, please get guilty to financial statement fraud. These manager used false journal entries to record fictitious sales, head inventory and public warehouses so that it could be recorded as sold and required sales orders to be backdated so that the sale could be moved to an earlier period.the combined effect of these actions caused 25 million out of 40 million and quarterly sales to be phony. A. Why might control procedures listed in this chapter be insufficient in stopping this type of fraud? B.Would an audit committee made up of representatives from Senior Management be effective in stopping this type of fraud?The kickback is a form of fraud often associated with purchasing. Most organizations expect their purchasing agents to select the vendor that provides the best products at the lowest price. To influence the purchasing agent in his or her decision, vendors may grant the agent financial favors (cash, presents, football tickets, and so on). This activity can result in orders being placed with vendors that supply inferior products or charge excessive prices. Describe the controls that an organization can employ to deal with kickbacks. Classify each control as preventive, detective, or corrective.
- Which of the following is an example of fraudulent financial reporting? a. The treasurer diverts customer payments to his personal due, concealing his actions by debiting an expense account, thus overstating expenses. O b. An employee steals inventory and the "shrinkage" is recorded in cost of goods sold. O c. Company management changes inventory count tags and overstates ending inventory, while understating cost of goods sold. O d. An employee steals small tools from the company and neglects to return them; the cost is reported as a miscellaneous operating expense.4. Cost of Goods Sold is increasing at rate that does not match sales or gross profit. While sales and gross profit seem to be trending down, the Cost of Goods Sold. Specifically, we see a drop in sales and gross profit in 2021, yet the cost of goods sold increased. What type of documentation and information should the auditors request to further evaluate for potential fraud? What might explain this inconsistency?What internal control procedure(s) would provide protection against the following threats? a. Theft of goods by the shipping dock workers, who claim that the inventory shortages reflect errors in the inventory records.b. Posting the sales amount to the wrong customer account because a customer account number was incorrectly keyed into the system .c. Making a credit sale to a customer who is already four months behind in making payments on his account. d. Authorizing a credit memo for a sales return when the goods were never actually returned. e. Writing off a customer’s accounts receivable balance as uncollectible to conceal the theft of subsequent cash payments from that customer. f. Billing customers for the quantity ordered when the quantity shipped was actually less due to back ordering of some items .g. Lost sales because of stockouts of several products for which the computer records indicated there was adequate quantity on hand. h. A sales clerk sold a $7,000 wide-screen TV…
- For each of the following three independent cases of employee fraud, recommend how to prevent similar problems in the future: Case A: Due to abnormal inventory shrinkage in the audiovisual department at a retail chain store, internal auditors conducted an in- depth audit of the department. They learned that a customer frequently bought large numbers of small electronic components from a certain cashier. The auditors discovered that they had colluded to steal electronic components by not recording the sale of items the customer took from the store. Case B: During an unannounced audit, auditors discovered a payroll fraud when they distributed paychecks instead of department supervisors. When the auditors investigated an unclaimed paycheck, they discovered that the employee quit four months previously after arguing with the supervisor. The supervisor continued to turn in a time card for the employee and pocketed his check. Case C: Auditors discovered an accounts payable clerk who made…So, owner of a trading company engaged your services as auditor. There is a discrepancy between the company’s income and the sales volume. The owner suspects that the staff is committing theft. You are to determine whether or not this is true. Your investigation revealed the following: The physical taken on December 31, 2018 under your observation showed that cost was P26,500. The inventory on January 1, 2018 showed cost of P39,000. The accounts receivable as of January 1, 2018 were P13,500. During 2018, accounts receivable written off amounted to P1,000. Accounts receivable as of December 31, 2018 were P37,500. Outstanding purchase invoices amounted to P30,000 at the end of 2018. At the beginning of 2018, they were P37,500. Receipts from customers during 2018 amounted to P300,000. Disbursement to merchandise creditors amounted to P200,000. The average gross profit rate was 40% of net sales. Required: Total Sales Total Purchases Inventory Shortage28. Which of the following would be a red flag that internal auditors should look at for the possibility of inventory fraud?I. The controller has assumed responsibility for approving all payments to certain vendors.II. The controller has continuously delayed installation of a new accounts payable system, despite a corporate directive to implement it.III. Sales commissions are not consistent with the organization's increased levels of sales.IV. Payments to vendors are supported by copies of receiving memos, rather than originals. Group of answer choices I and II only II and III only I, II, and IV only I, II, III, and IV I, III, and IV only
