Occupational Fraud Prevention

Phar-Mor, Inc was a thriving discount grocery store in the late 1980’s. Phar-Mor was moving product quickly but profit margins were not significant enough to pay the bills. By the early 1990’s, Phar-Mor declared bankruptcy due to fraudulent financial reporting and misappropriation of assets, making it one of the largest frauds in U.S. history. Below, we will use auditing standard AU 316.85 Appendix A in conjunction with the video “How to Steal $500 million” to analyze how incentives/pressures, opportunities, and attitudes/rationalizations allowed for fraud to start and continue at Phar-Mor.

Throughout history and in our own time, legitimate accounting methods have been utilized to fraudulently engage in manipulating activities that results in illicit gains to the perpetrators and losses to individuals and financial institutions.

According to the Sarbanes-Oxley Section 404 Act, it is the responsibility of the management to establish and maintain internal controls required for financial reporting. The company’s latest year assessment of

Yes. Occupational fraud and abuse is the use of one's occupation for personal enrichment through the dileberate misuse or misapplication of the employing organizations resources or assets. Since this jacket belonged to them that means I took one of their assets which, as mentioned above, is key to committing occupational fraud and abuse. This jacket was owned by the people at the summer camp therefore taking the jacket means I broke this law.

Internal controls, no matter how well designed and operated, provide only reasonable assurance to management regarding the achievement of a department’s objectives. Certain limitations are inherent in all internal control systems. Despite these limitations, the reasonable assurance that internal control does provide enables a department to focus on reaching its objectives while minimizing undesirable events. Managers can start by analyzing the two circumstances most likely to threaten the achievement of objectives, change and inherent risk. The examples listed below are not all-inclusive, nor will every item apply to every department. The risk to accomplishing objectives increases dramatically during a time of change. Because any change increases risk, managers must diligently monitor and assess all significant changes within their departments. Some examples of change that expose a department to increased risk are: Changes in personnel. Changes in the regulatory environment. New or revamped information systems and technology. Rapid growth or expansion of operations Moving to a new location. New programs or services. Reorganizations within or between

According to the 2014 Report to the Nation on Occupational Fraud and Abuse, the average organization lost about 5% of revenues each year to occupational fraud with a median loss estimated at $145,000 based on the results of a study involving survey participants. Additionally, the median duration of a fraud scheme was 18 months from the beginning until the discovery. Furthermore, 49% of the tips which permitted the detection of fraud involved employees who stood as whistleblowers against their organizations. Indeed, the banking and financial services held the first place with 17.8%, followed by the government and the public administration sector which ranked second and also counted for 10.3% of fraud cases. Finally, the lack of internal controls

There are several procedures that should be considered when implementing internal controls for your business. There should be a segregation of duties between different individuals to lessen the threat of

This is the most common form of occupational fraud and accounts for over 85% of fraud cases. It also usually has the lowest cost of loss. Asset misappropriation is the intentional, illegal use of the company’s assets for one’s personal use (Mohlenhoff & Uhl, 2014). An example would

■ The audit manager recently conducted an interview with management in order to obtain an understanding of EC/SS’s control environment. This interview dialogue is what students rely on to assess EC/SS’s control environment.

Rapidly updated managerial reports can be generated and business / staff performance can be analysis.

Since the implementation of SOX, companies were required to establish effective and efficient internal controls in order to be in compliant with the SEC requirements. A company that establishes a strong, effective internal control system finds it helps with the facilitation of initiating, authorizing, recording, processing, and reporting financial data consistently in agreement with GAAP. Companies with a strong set of internal controls will help companies ensure the financial data they are reporting is accurate and truthful. According to COSO internal control is defined as “a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of the following objectives: 1. Reliability of financial reporting, 2. Compliance with laws and other regulations, 3. Efficiency and effectiveness of business operations, and 4. Protection of property” (Kanagaretnam et al., 2014 & Kapic, 2013). Additionally, internal controls contain policy and procedures that assist the company and management with smooth operations of all daily business functions.

The internal controls of the sales return process is an important aspect of objectives in week three. Sales return involves merchandise returned for a defect, excess quantity, or from having received the wrong items. The risks that can arise in the sales return process are the authorization of transactions, segregation of duties, security of assets, adequate documentation and independent checks. The internal control over sales returns should involve checks to lessen the misappropriation of cash, segregation of duties to avoid overstatement of revenue recognition, adequate records to negate fictitious inventory, and independent checks for the receipt of accounts receivable.

The current company system is out of control and steps need to be taken to regain system control. Internal control is vital to improve an organization’s operation efficiency and effectiveness, financial reporting reliability, and law and regulation compliance

Risk is a necessary undertaking for any business. Success in business is determined by effectively managing the risk. Effective risk management helps to protect the company from losses because of poor accounting practices and fraud. Good controls also protect company management from the liability when they certify the financial statements issued in the annual report because they are also certifying the internal controls. The internal control process begins with management and the attitude that management portrays through the company. From this attitude, management gives direction, and the direction becomes policies and

The control and reporting system including preparation of the annual business plan, imposed a heavy burden in both time and money on the management of an operating unit. The change to a formal monthly reporting system has been difficult to a realize cause due to the low level of employees training and many tasks must be fully performed by the controller and chief accountant. The number of