You have been recently employed by CJ Patel Limited as their Payroll Officer. The executive finance director, Rajan Karan, has informed you that a significant fraud took place during the year in the payroll department. A number of fictitious employees were created on the payroll and wages were paid into one bank account. This bank account belonged to two supervisors, who were husband and wife, and have been working for the company for over twelve years. One had sole responsibility for setting up new employees in the payroll system and the other processed and authorized bank transfer requests for wages and supplier payments. These employees no longer work for the company and Rajan has asked the audit firm for recommendations on how to improve controls in this area to prevent this type of fraud occurring again as it had cost the company a loss of $150,000. CJ Patel Limited operates a Human Resources department.
Required:
In relation to the payroll fraud, identify and explain THREE internal controls the company should implement to reduce the risk of this type of fraud occurring again and, for each control, describe how it would mitigate the risk.

Answer rating: 100% (QA)

Internal controls are the rules and guidelines implemented by the organization to ensure that the activities of the company are conducted with integri... View the full answer