Using internal control to restrict illegal or unethical behaviorRequired
For each of the following fraudulent acts, describe one or more internal control procedures that could have prevented (or helped prevent) the problems.
a.Everyone in the office has noticed what a dedicated employee Jennifer Reidel is. She never misses work, not even for a vacation. Reidel is in charge of the petty cash fund. She transfers funds from the company’s bank account to the petty cash account on an as-needed basis. During a surprise audit, the petty cash fund was found to contain fictitious receipts. Over a three-year period, Reidel had used more than $4,000 of petty cash to pay for personal expenses.
b. Bill Bruton was hired as the vice president of the manufacturing division of a corporation. His impressive resume listed a master’s degree in business administration from a large state university and numerous collegiate awards and activities, when in fact Bruton had only a high school diploma. In a short time, the company was in poor financial condition because of his inadequate knowledge and bad decisions.
c. Havolene Manufacturing has good internal control over its manufacturing materials inventory. However, office supplies are kept on open shelves in the employee break room. The office supervisor has noticed that he is having to order paper, tape, staplers, and pens with increasing frequency.
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