Fraud and Control - 25 Marks

This Question has FOUR Parts: Part 1 (7 Marks); Part 2 (6 Marks) Part 3 (6 Marks), and Part 4 (6 Marks). Answer ALL questions.

Part 1 (7 Marks)

This Part has three Questions. Using the information provided below answer Questions (i), (ii) and (iii):

An accountant with the Novel Securities was charged with embezzling over $100,000 to purchase a sailing boat and to invest in shares. Police alleged that he created fictitious invoices from two companies that had contracts with the Fintech Premium and Infotech Digital Services. He then wrote checks to pay the fictitious invoices and deposited them into a bank account he had opened under the name of one of the companies.

When he was apprehended, he cooperated with police to the extent of telling them of the bogus bank account and the purchase of the sailing boat and the shares. The accountant was a recent honours accounting graduate from a reputable university who, his supervisors stated, was a very honest and hardworking employee.

Part 1 Question (i) - 1 Mark

How does the accountant not fit the profile of a fraudster?

Part 1 Question (ii) - 3 Marks

What fraud scheme did he use to perpetrate his fraud?

Part 1 Question (iii) - 3 Marks

What controls could have prevented the fraud?

Part 2 - 6 Marks

This Part has two Questions. Answer Question (i) (2 Marks) and Question (ii) (4 Marks) using the information below:

Dimitri is an accountant with PwCo. The firm maintains a strict policy of requiring all employees to change their passwords every sixty days. In early March 2021, Dimitri received an e-mail claiming that there had been an error in updating his password. The e-mail contained a link to a website with instructions for re- updating his password. Something about the e-mail made Dimitri suspicious, so he called PwCos information technology department and found that the e-mail was fictitious.

Part 2 Question (i) - 2 Marks

Identify the computer fraud and abuse technique used.

Part 2 Question (ii) (4 Marks) Discuss the ways in which Dimtri can deal with these types of email.

Part 3 -6 Marks

This Part has TWO Questions worth 3 Marks each. Answer Questions (i) and (ii) below.

Explain how the principle of separation of duties is violated in each of the following two situations. Also, suggest one or more procedures to reduce the risk and exposure highlighted in each example.

Part 3 Question (i) - 3 Marks An inventory clerk saw some damaged or expired goods lying in a corner of the warehouse. Some goods were in better condition, so she decided to take them home for personal use, and the rest she dumped in the waste bin.

Part 3 Question (ii) - 3 Marks

A receiving clerk received 13 boxes of ball point pens included in the shipment. The clerk took one box aside and took it home after the shift had ended.

Part 4

This Part has TWO Questions worth 3 Marks each. Answer Questions (i) and (ii) below.

Part 4 Question (i) -3 Marks Give one example each of (a) a Preventive Control, and (b) a Detective Control, in Sales Order Processing.

Part 4 Question (ii) - 3 Marks

Explain, using an example, how batch totals (hash total, financial total and record count) can achieve the dual aims of input accuracy and input completeness.