Académique Documents
Professionnel Documents
Culture Documents
Required
1. Before Tutorial 5 Moodle Question 1 and 2
2. Presentation Question
3. Additional Tutorial Question 1
4. Textbook questions:
Pages 113 117 Questions 2.13, 2.14, 2.19, 2.26
Page 119 120 Questions 1, 2, 3
Chapter 5 page 265 Question 2, 3, 4
Before Tutorial 5 Moodle Questions post your attempt to Moodle before your tutorial
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MCD2060 Trim1 2013 Tutorial 5 Internal Ctrl Regulation Inc Records Students
Question 2 Presentation
Required:
Read the following articles
Select from the articles and your independent research to present the following:
(a) What are the features of sound internal control
(b) What limitations in internal control are identified in the articles
(c) Suggest what measures could be taken to improve internal control in the situations
referred to in the articles
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MCD2060 Trim1 2013 Tutorial 5 Internal Ctrl Regulation Inc Records Students
Question 2 Presentation
Have bank statements mailed to your home or a post office box. That way, you get to review
them before your bookkeeper does.
Look out for checks written to suppliers or others whom you don't know, or those made out
to a third party but endorsed by someone in your company. Also look for missing checks.
Say a check is made out to "Office Supply Inc.," said CPA firm owner Sharon Hart of
Barcalow & Hart PLLC in Glen Allen. But the signature on the back is that of an employee in
your company. That's who got the money. There's something kaflooey going on.
Question gaps in check numbers. Are 10 checks missing? Are checks voided? Some people
void checks in the accounting system, then falsify them for fraudulent use, Hart said.
Arrange for surprise audits. Bring in a CPA once a year at different times to conduct a
surprise audit of your company's financial records. Knowing one may occur at any time can
be a deterrent.
Screen potential hires thoroughly. Check past employment, personal and professional
references and criminal records. Ask your trade association or a fellow entrepreneur for the
name of a reputable service, or search online using the keywords "criminal background
checks [your] county."
Create a no-tolerance culture. Communicate to every worker what sort of activities constitute
fraud and what will happen to those committing it. Consider setting up a third-party hot line
for workers to report suspicious activity.
Watch for other red flags. Among them: You ask to see certain reports, but your finance
person fumbles around and can't seem to come up with them. Or, one person does everything
from billing to collections to disbursements, but no one is overseeing the activity.
"The owner's involvement is critical," Hart said. "It really makes a difference."
(C) 2007 Richmond Times-Dispatch. via ProQuest Information and Learning Company;
All Rights Reserved
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MCD2060 Trim1 2013 Tutorial 5 Internal Ctrl Regulation Inc Records Students
Question 2 Presentation
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MCD2060 Trim1 2013 Tutorial 5 Internal Ctrl Regulation Inc Records Students
Question 2 Presentation
Reviewing the general ledger and journal entries for unusual, unexplained or unsupported
amounts, entries, transactions or patterns can indicate the possibility of fraud and where it
might be occurring and concealed.
Unusual journal entries may include inappropriate charges to expenses or write-offs of assets
such as inventory or receivables, and the entries may be made near a month- or year-end to
conceal the effects of a theft.
An example is an unexplained credit to inventory with the offsetting debit to cost of sales but
with no related sales transaction recorded.
In addition to accounts receivable, inventory and accounts payable, accounts susceptible to
fraudulent entries include the following:
Expense accounts over which no one department or individual has control, such as
general maintenance accounts, general transportation accounts (cabs, freight, etc.),
stationery and general office supplies accounts or scrap disposal accounts
Suspense and cash sweep accounts
Deferred asset or liability accounts
Contra-accounts, such as the bad debt reserve account or the accumulated
depreciation account
Inter-company accounts
Accounts over which a sole, domineering, incompetent or frequently absent individual
has control
The chart of accounts should be scanned to identify accounts of these types that may be
vulnerable to fraudulent entries and which should be scrutinized. The investigator also should
investigate and reconcile differences between control accounts and supporting ledgers. Any
differences may be due to fraud concealed in one or the other account or ledger.
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MCD2060 Trim1 2013 Tutorial 5 Internal Ctrl Regulation Inc Records Students
Question 2 Presentation
We conducted a forensic examination of their offices and then the company's server, to no
avail. After investigating files on the laptops' hard drives, we found nothing we could use.
Now, we were at an impasse.
But as breaks sometime come, we uncovered that the conspirators did communicate through
e-mail -- not the company's Outlook e-mail running through the server, but on outside sites
where they had accounts with Yahoo! and Hotmail. Now we had something.
We performed a mirror image of the second laptop's hard drive. The CEO had narrowed
down to a three-day period when the two doctors started to voice, in unison, how and why the
CEO, CFO and their staffs were to be terminated because the investor had lost confidence in
them and was withdrawing his critical financial support until they were replaced before the
IPO.
The investor lived in a rural paradise more than 100 miles away from the company
headquarters. We checked the company's telephone records and the doctors' company cell
phone records for this time period. There were no calls with the investor on the company
phones, but there were increased conversations among the three during this time period on
the doctors' cell phones, with a few calls directly prior and afterward.
Now we had something to go on. We began to look for ghosts (a ghost is a writing to the
hard drive that remains cached in Random Access Memory -- known as RAM).
When you think about it, it seems quite logical. When you write an e-mail on your computer
from an Internet e-mail account, what is really happening? That message isn't held in virtual
space; it is written to your hard drive. But because it is not saved to your hard drive, the
metadata -- the tags (also written to the hard drive) that tell your computer what you are
doing and where on your computer it is being done -- are deleted from the tracking file when
you turn the computer off. However, a ghost of the tags remain, even when they may be
overwritten by new data.
Forensic software is pretty comprehensive these days. We knew that during this three-day
time period, there was no reason for any correspondence to take place on the doctor's laptop
with the investor's name attached to it. So we queried the software to find if the investor's
name had been written to the hard drive during this time period, and if so, to track the
metadata attached to the investor's name to the whole writing.
Bingo! You guessed it -- we got the smoking gun -- correspondence between the investor and
the doctors that laid out the whole process and the doctors' roles in staging the coup. We even
got admittance that care was needed because what they were attempting was illegal. Who
could ask for anything more?
Coup blocked. Doctors and an investor thrown off board. New investors waiting in the wings.
The IPO went forward.
Lessons learned. Nothing really disappears. It may be destroyed, but if it isn't destroyed, it is
still there and can be found.
Articles Two, Three and Four extracts from My Life in Crime: Chronicles of a Forensic
Accountant
By William C. Barrett III, CPA/ABV, CVA, CTP, CCFM
http://accounting.smartpros.com/x59274.xml
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MCD2060 Trim1 2013 Tutorial 5 Internal Ctrl Regulation Inc Records Students
Additional Questions Question 1
DEF Limited Bank Reconciliation Statement as at 1 June
Balance as per Bank Statement 2,918 CR
Add: deposit not credited 600
1,759
Less: Unpresented cheques/debits
Chq No. 287 8,000
Chq No. 288 800 8,800
Balance as per Bank Ledger account 5,282 CR
Australia Bank: Bank Statement Account: DEF Limited
Date Particulars Debits Credits Balance Dr/CR
1-Jun Balance 2,918 CR
2-Jun 287 8,000 5,082 DR
2-Jun Deposit 600 4,482 DR
12-Jun Deposit 1,602 2,880 DR
Bank fees 54 2,934 DR
14-Jun IB 01 180 3,114 DR
Deposit 846 2,268 DR
IB 02 90 2,358 DR
Interest on
Investment 360 1,998 DR