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Fraud Auditing

reporting

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akiaraiversen
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35 views2 pages

Fraud Auditing

reporting

Uploaded by

akiaraiversen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1. You are having lunch with another graduate student.

During the course of your


conversation, you tell your friend about your new fraud examination class. After
you explain the devastating impact of fraud on businesses today, she asks you
the following questions:
 What is the difference between fraud and error?
- Fraud is committed with the intention to harm another party, whereas errors are
the mistakes that an individual makes without the intention to harm other
individuals.
 With all the advances in technology, why is fraud a growing problem?
- The perpetrators can easily commit fraud because of advanced technology. It is
easier to obtain information from the user’s systems by way of hacking.
 How would you respond to your friend?
2. Alexia Jones is a worker at a local 24-hour pharmacy. Alexia works the night shift
and is the only worker. Because management is cost-conscious and business is
slow at night, Alexia has been given the responsibility to do the accounting from
the previous day. Alexia has two children, and her husband does not work. Alexia
has strong pressure to provide well for her family.
 Is the pharmacy at risk for fraud? Why or why not?
- Yes, the company is under risk of fraud. Individual, Alexia is the only worker in
the origination and had an opportunity to steal cash because of the financial
pressure to do well for their family.
 How does the fraud scale help us to determine if risk for fraud is high or
low in this situation?
- The company is at high risk of risk on considering the fraud scale because the
risk of fraud becomes higher in the pressure and the opportunity being high.
There are little facts about individual Alexia’s rationalization, but these factors are
enough to evaluate the risk.
 Assuming that you were recently hired by the pharmacy as a business
consultant, what information would you provide to the owner of the
pharmacy concerning fraud?
- The owner of the company needs to know that there is a high risk of fraud and
also, there is a lack of segregation of duties and other internal controls in the
system.

3. Peter Jones, a senior accountant, and Mary Miller, a junior accountant, were the
only accountants for XYZ Company, a medium-sized business. Peter had been
with the company for over four years and was responsible for the Purchasing
Department. Mary had been working at the company for a little over five years,
and she had neither applied for a vacation nor taken any days off in the last three
years. She was responsible for cash receipts and disbursements. She also
collected the cash from the cash register, counted it and matched it with cash
register receipts, made a record of daily receipts, and then put the money in the
safe. Once a week, she would take the paperwork to her supervisor, Susan
Lowe, one of the managers, who would check it. Mary later resigned from the
company. At the time of her resignation, Peter was asked to handle Mary’s
responsibilities while the company looked for a person to replace her. Peter soon
realized that there had been some manipulation of accounting records and
embezzlement of funds. Investigations revealed that approximately $30,000 had
been stolen.
 What do you think might have allowed this fraud?
- The absence of internal checks, segregation of duties, and other control
procedures such as periodical inspection, budgetary control, and so on have
allowed this fraud. Transactions remain unchecked on a day-to-day basis.
 How could this fraud have been avoided?
- Fraud of cash embezzlement, $30,000 may be avoided by
>implementing internal checks.
>segregation of duties
>shuffling of duties periodically
>other controls such as budgetary control

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