a.
Concept Introduction:
Internal
The internal control principle that was violated.
b.
Concept Introduction:
Internal control system: This is a set of policies and procedures used by managers to protect assets, encourage effective operations, ensure reliable record keeping, and support the policies of the company. Managers use an internal control system to prevent avoidable losses, plan operations of the business, and monitor company and employee performance.
The internal control principle that was violated.
c.
Concept Introduction:
Internal control system: This is a set of policies and procedures used by managers to protect assets, encourage effective operations, ensure reliable record keeping, and support the policies of the company. Managers use an internal control system to prevent avoidable losses, plan operations of the business, and monitor company and employee performance.
The internal control principle that was violated.
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FINANCIAL AND MANAGERIAL ACCOUNTING
- Pls explain first how you solve it. Thank you. F COMPANY, organized on March 1, 2021, has a very poor internal control system. Thecompany's cashier is also its accountant. After 9 months of operations, the company's managersuspects that the cashier-accountant has been misappropriating company collections. You havebeen engaged to audit the company's accounts to determine the extent of fraud, if any. You started the audit on November 15. On that date, the cash on hand per your surprise countwas P5,140. Also on that date, the bank confirmed that the balance of the company's currentaccount was P26,328. Your examination of the records reveals that a check for P1,852 wasoutstanding on November 15. The company's markup is 40% of sales. Further examination of the company's records reveals the following balances at November 15,2021:arrow_forwardConsider the scenario in which Brooke Miles, an accounts payable clerk for West Coast Design Inc., misappropriated $48,350 by paying false bills for commodities that were never delivered to the company. It was the clerk's responsibility to open accounts in the names of the phony corporations and pay the cheques at a nearby bank. Describe a fraud-prevention or detection method that may have been used to avoid or identify the scam.arrow_forward18.During an audit of a retail company, Lily, newly hired internal auditor, found a scheme in which the warehouse manager and a purchasing staff diverted approximately Php2 million worth of goods to an outside warehouse, the sold the goods to third parties. The fraud was not found earlier by the internal audit team since the warehouse manager updated the perpetual inventory records and then forwarded receiving reports to the accounts payable department for processing. Which of the following procedures did Lily perform which would have most likely led to the discovery of the missing materials and the fraud? Group of answer choices Random sampling of receiving reports and tracing to the recording in the perpetual inventory records. Selecting a random sample of purchase orders and trace to receiving reports and to the records in the accounts payable department. Performance of physical inventory count, then reconciliation of the amounts with the perpetual inventory records. Random…arrow_forward
- A long-time employee had become such a trusted employee that their bosses had put them in charge of paying bills, balancing bank accounts, and handling other cash management responsibilities. The employee became ill and took sick leave. During their absence, their employer determined they had been stealing company cash for years by forging checks and tamporing with company documents. The stolen cash was used to stoke a gambling habit. In total, the employee stole nearly $320,000. Answer questions in short answers What were the employee's perceived opportunities? What pressure did the trusted employee have to commit fraud? How did the fact that they were a trusted employee give them more opportinity to commit fraud? How do vices motivate people to commit fraud?arrow_forward1. "The steps in the accounting cycle for a merchandising company are different from the accounting cycle for a service company." Do you agree or disagree? Explain. 2. A local bank reported that it lost $150,000 as the result of an employee fraud. Mr. X is not clear on what is meant by an "employee fraud." Explain the meaning of fraud to Mr. X and give examples of frauds that might occur at a bank. 3. On September 1, ABC Company had an inventory of 30 calculators at a cost of $18 each. The company uses a perpetual inventory system. During September, the following transactions occurred. Sept. 6 Purchased 80 calculators at $20 each from DeVito Co. for cash. Sept. 9 Paid freight of $80 on calculators purchased from DeVito Co. Sept. 10 Returned 2 calculators to DeVito Co. for $42 credit (including freight) because they did not meet specifications. Sept. 12 Sold 26 calculators costing $21 (including freight) for $31 each to Mega Book Store, terms n/30. Sept. 14 Granted credit of $31 to Mega…arrow_forwardInternal Controls An employee of JHT Co., a private trucking company, was responsible for resolving roadway accident claims under $25,000. The employee created fake accident claims and wrote settlement checks between $5,000 and $25,000 to friends or acquaintances acting as phony “victims.” One friend recruited subordinates at his place of business to cash some of the checks. In addition, the JHT employee also recruited lawyers, who he paid to represent both the trucking company and the fake victims in the bogus accident settlements. When the lawyers cashed the checks, they allegedly split the money with the corrupt JHT employee. This fraud went undetected for two years. Please answer the following question: What control procedures should be changed to prevent such fraud?arrow_forward
- Assume that Brooke Miles, accounts payable clerk for West Coast Design Inc., stole $48,350 by paying fictitious invoices for goods that were never received. The clerk set up accounts in the names of the fictitious companies and cashed the checks at a local bank. Please use at least 150 words to describe a control procedure that would have prevented or detected the fraud.arrow_forwardInternal Controls An employee of JHT Co., a private trucking company, was responsible for resolving roadway accident claims under $25,000. The employee created fake accident claims and wrote settlement checks between $5,000 and $25,000 to friends or acquaintances acting as phony “victims.” One friend recruited subordinates at his place of business to cash some of the checks. In addition, the JHT employee also recruited lawyers, who he paid to represent both the trucking company and the fake victims in the bogus accident settlements. When the lawyers cashed the checks, they allegedly split the money with the corrupt JHT employee. This fraud went undetected for two years. Please answer the following questions: What weaknesses in internal control contributed to this fraud? Why would it take so long to discover such a fraud? What control procedures should be changed to prevent such fraud?arrow_forwardIdentify the fraud triangle risk factor (Opportunity, Pressure, or Rationalization) in each situation. 1. The business has no cameras or security devices at its warehouse. 2. A worker sees other employees regularly take inventory for personal use. 3. Payroll manager feels she is greatly underpaid. 4. No one matches the cash in the register to receipts when shifts end. 5. Managers are expected to grow business or be fired. 6. Managers are told to make extreme cuts in expenses. Opportunity Rationalization Pressure Opportunity Pressure Pressurearrow_forward
- Fraud refers to any intentional act to achieve gain, usually monetary. Committing a fraud isunethical and resulting in bad consequences, not just to the perpetrator, but also others (e.g.shareholders, workers etc.). Several example of fraud scenario are listed as follows:i). Store manager misused company’s car for personal purpose because he is the onlyperson that monitor the movement and usage of the car.ii). The accountant and the store keeper of AAA Enterprise co-operate in stealing thecompany’s inventory and they gain a lot of money from it.iii). The Chief Financial officer (CFO) of ABC Sdn Bhd had reported over $700,000 fakeearnings because he wants to achieve sales target.iv). XYZ Sdn Bhd booked revenues earlier than it should have because it was at risk ofmissing analyst estimates.Required;a. Identify the type of fraud committed in the scenario i). to iv). b. Based on the fraud triangle (i.e. pressure, opportunity and rationalization), identify thecause of fraud happen in the…arrow_forwardAssume that brooke miles accounts payable clerk for west coast design inc.stole $48,350 by paying fictitious companies and cashed the checks at a local banks. Describe a control procedure that would have prevented or detected the fraud?arrow_forwardCharles Hart, an accounts payable clerk, is an hourly employee. He never works a minute past 5 P.M. unless the overtime has been approved. Charles has recently found himself faced with some severe financial difficulties. He has been accessing the system from his home during the evening and setting up an embezzlement scheme. As his boss, what control technique(s) discussed in lectures network risks and auditing could you use to help detect this type of fraud?arrow_forward
- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning