Business
Engineering
Math
Science
Social Science
Internal controls An employee of JHT Holdings, Inc., a trucking company, was responsible for resolving roadway accident claims under $25,000. The employee created fake accident claims and wrote settlement checks of between $5,000 and $25,000 to friends or acquaintances acting as phony “victims.” One friend recruited subordinates at his place of work to cash some of the checks. Beyond this, the JHT employee also recruited lawyers, whom 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. Why would it take so long to discover such a fraud?
Accounting (Text Only)
Solutions
Accounting (Text Only)
Internal controls
An employee of JHT Holdings, Inc., a trucking company, was responsible for resolving roadway accident claims under $25,000. The employee created fake accident claims and wrote settlement checks of between $5,000 and $25,000 to friends or acquaintances acting as phony “victims.” One friend recruited subordinates at his place of work to cash some of the checks. Beyond this, the JHT employee also recruited lawyers, whom 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.
Why would it take so long to discover such a fraud?
Internal Control: Internal control refers to the policies, and plans of the business organization along with other measures with a view to safeguard its assets, encourage the employees to adhere to the plans, to improve on the operational efficiency, and to ensure correct and reliable accounting information. Internal control is a process which ensures continuous reliability of accomplishment of a company’s objectives, related to operations, financial reporting, and in conformity with laws and regulations.
The following are the some of the internal control procedures:
- Competent personnel, rotating duties, and mandatory vacations
- Separating responsibilities for related operations
- Separating operations, custody of assets, and accounting
- Proofs and security measures
To state: the reasons for discovering the fraud very late.
Explanation of Solution
Chapter 8 Solutions
Additional Business Textbook Solutions
Accounting Information Systems
Financial & Managerial Accounting
Cornerstones of Financial Accounting
Corporate Financial Accounting
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Probability and Statistics for Engineering and the Sciences
Foundations of Business (MindTap Course List)
Principles of Economics (MindTap Course List)
Principles of Macroeconomics (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
STATISTICS F/BUSINESS+ECONOMICS-TEXT
Brief Principles of Macroeconomics (MindTap Course List)
Fundamentals of Financial Management (MindTap Course List)
Essentials of Business Communication (MindTap Course List)
Financial And Managerial Accounting
College Accounting, Chapters 1-27
Financial Accounting
Essentials of Economics (MindTap Course List)
Management, Loose-Leaf Version
Intermediate Accounting: Reporting And Analysis
Accounting Information Systems
Managerial Accounting: The Cornerstone of Business Decision-Making
College Accounting (Book Only): A Career Approach
Contemporary Marketing
MKTG 12:STUDENT ED.-TEXT
Financial & Managerial Accounting
Financial Accounting
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
Exploring Economics
Statistics for Business & Economics, Revised (MindTap Course List)
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
College Accounting (Book Only): A Career Approach
Principles of Macroeconomics (MindTap Course List)
Fundamentals of Financial Management (MindTap Course List)
Pkg Acc Infor Systems MS VISIO CD
PAYROLL ACCT.,2019 ED.(LL)-TEXT
Survey of Accounting (Accounting I)
Corporate Financial Accounting
Purchasing and Supply Chain Management
Macroeconomics
Economics (MindTap Course List)
Practical Management Science
Cornerstones of Cost Management (Cornerstones Series)
Economics For Today
Microeconomics
Managerial Accounting
Economics: Private and Public Choice (MindTap Course List)
Micro Economics For Today
Understanding Management (MindTap Course List)
Macroeconomics: Private and Public Choice (MindTap Course List)
MACROECONOMICS FOR TODAY
Microeconomics: Private and Public Choice (MindTap Course List)
