Assignment on Fraud and Internal Control Measures

Internal Control Measure of Fraud and Internal Control Measures:

Karlos has the responsibility of taking orders, managing inventory and paying for the inventory. Using this authority she can commit an act of frauds which may illegally benefit the overall company as income tax expense will be reduced. Karlos should implement a physical control system by periodic inventory checks. Moreover, separate managerial staff members should be recruited for inventory order taking and payment of inventory. Thus, falsifying orders to be paid from other external accounts would be prevented.    

Potential Fraud Scheme: 2

Internal Control Measure of Fraud and Internal Control Measures:

In this fraud scheme, Karlos is having double responsibility which includes custody of the company's assets and at the same time, she is responsible to keep records regarding assets. She should not be given this much authority to make decisions, manage assets, and keeping records. In this particular situation, she can easily make frauds in the assets. Somehow, even she is the owner of a small craft shop but she cannot hold these authorities at the same time. In such a situation, she can recruit a new employee to support her in these activities. In case, she wants to have custody of assets then the responsibility of record-keeping should be given to another employee.    

Potential Fraud Scheme: 3

Internal Control Measure of Fraud and Internal Control Measures:

Karlos and Lateef are two entities in the business who have different responsibilities. Although, both are given direct access to the accounting system implemented in the company. Lateef is responsible for keeping records regarding sales and preparation of all bank deposits. While on the other hand, Karlos, has the responsibility of handling accounting functions in the shop. In such a situation, Lateef can manipulate financial data or make changes in the accounts records without Karlos realizing it. Responsibilities should be delegated separate employees although at the same time proper measures should be taken regarding control of information access.     

Potential Fraud Scheme: 4

Internal Control Measure of Fraud and Internal Control Measures:

In this fraud scheme, Lateef has chances of fraud as responsibilities regarding bank deposits and recording sales are both given to the same person. Considering this situation, the best internal control measure is to hire a new employee in the finance department to handle one of these responsibilities either sales recording or preparing bank deposits. Thus, chances of underreporting sales and failing to deposit revenue amount of sales would be controlled and reduced for the betterment of shop.       

Potential Fraud Scheme: 5

Internal Control Measure of Fraud and Internal Control Measures:

In this potential fraud scheme, Karlos shop owner has petty cash funds to meet miscellaneous expenses of the shop. With this petty cash, Karlos may increase the chances of frauds as employees can reimbursed funds incorrectly. In this scheme, chances of frauds are clear which can be controlled by the internal control measures. For instance, Karlos should be given custody to receive receipts from her employees whenever they take some cash amount from petty cash funds to ensure whether expenses were made or not?. Thus, the chances of frauds will reduce.     

Potential Fraud Scheme: 6 of Fraud and Internal Control Measures

Internal Control Measure:

A special discount offer is started by the Karlos stores to grab the attraction of customers. However, from this discount coupons scheme employees can also take benefit by making frauds. Employees may scan coupons but charge full prices from customers. Thus pocketing the differences will benefit them but negatively impact shop image. Internal control measure for this fraud scheme is to make the receipt collection mandatory for customers. Clerks and shop employees should be assigned duty to record coupon scanning and create a receipt of transaction.    

Potential Fraud Scheme: 7 of Fraud and Internal Control Measures

Internal Control Measure:

Employees working hours tracking system is not implemented in the shop therefore there are chances that employee may work fewer hours than their decided time span. Such a situation can be handled in a proper time card system is installed in the shop to track an employee’s working time.

Potential Fraud Scheme: 8 of Fraud and Internal Control Measures

Internal Control Measure:

Employees should not be given authority to make changes in the transactions. To control such frauds, the shop owner should have complete authority to monitor all changes made by the employees regarding record transactions. However, she should control access of irrelevant employees to prevent them from making changes in sales and revenue recording.