Question

Denis Frederick owns Never Leak, Inc., which is a small plumbing supply company that employs 16 workmen who perform plumbing tasks and 3 office staff. One of the office staff is John Higgins who has been with the company since it opened its doors. During that time, he has earned the trust of the owner and has proven to be a diligent employee who often works late, occasionally comes in on weekend for no additional pay, and hasn’t taken a substantial vacation in over 10 years. Instead, he staggers his vacation days throughout the year to avoid the need for a replacement and ensuring that none of the other office staff is burdened with his work. John’s primary tasks include: Responsible for POS cash and credit sales Bills the customers who purchase on credit Opens the mail and posts to AR records, and Prepares the daily cash deposits for the business. Another office worker, Larry Jones, handles ordering inventory and supplies from vendors, stocking, shipping merchandise, updating inventory records, and writing checks to vendors in payment of purchases. The third office staff member, Margaret Lilly, performs the payroll (writing paychecks and recording payroll payments) and general ledger functions. Required a).Discuss the risks inherent in the scenario. b).Make control recommendations to mitigate the risks under the constraint that no additional employees can be hired.

Answer 1

SOLUTION 2 3 4 a 5 6 7 8 9 A process to identify problems that effects business is known as risk analysis. The risk analysis process is used br the business is to reduce the adverse results. Here the risk is that a complete chain of task is assigned to a single employee and such employee have complete control on a particular task. John is responsible for complete chain of activity relating to sales. He has complete control on sales from billing till daily cash deposits. He has no check on his activities by Others. If he commits any error that shall remain undetected due to non involvement of other employee moreover he has opportunity to commit frauds like embazzelment of cash. Preparing wrong bills or undercast or overcast of AR, bills, cash deposits to hide his cheatings. In similar way both other employee have complete control on chain of activities they have equal opportunity to commit errors and frauds. The contrl to mitigate the risk are as follows 1 No complete control on complete chain of activity is provided to single employee. Like if billing is done by one employrr recording must be done by other and stocking by another. 2 The work of one employee must be reviwed by another employee. 3 Employee must be encoraged to take leave it has been noticed that many errors and frauds are detected when employee is on leave. 10 11 b 12 13 14 15 16 NOTE - PLEASE UPVOTE IT SHALL BE A GREAT FAVOR THANKS 17