In the following mini case, you will read several potential fraud issues in the company. You have to come up with control measures to prevent the fraud from happening.

Case background: Kayla, acting as the owner of her store, also has the opportunity to steal from herself. Her ownership position would offer a good cover-up for committing fraud. She has her own office in the back of the store that only she has access to. She also has ultimate authority over the perpetual inventory records and inventory orders, she pays bills, handles payroll, takes deposits to the bank, and reconciles bank statements. She could easily steal from her business if she wanted to because she does not separate her powers, nor does she have anyone check all of the bank reconciliations that she deposits herself. Although Lucy prepares the bank deposits, Kayla could make new ones and deposit those without any approval or oversight from other employees. She also has overall control over the internal accounting system, so she could easily adjust the inventory, deposits, sales, returns, etc. in order for her to steal whatever she wants. As mentioned earlier, Kayla also has her own locked office in the back where she could hide the evidence of her theft and conspire to steal more.

- Potential Fraud Scheme: 1- Lucy has her own locked office. She could conceal fraudulent behavior more easily than the other employees. Her office is located in the back of the store away from other employees and customers. What's the Internal Control?

- Potential Fraud Scheme: 2- Lucy prepares the bank deposits and records daily sales. What's the Internal Control?

-Potential Fraud Scheme: 3- Advertising expenses could have been overstated and an employee could have pocketed the extra funds. What's the Internal Control?

Answer rating: 100% (QA)

1 Potential Fraud Scheme Lucy has her own locked office She could conceal fraudulent behavior more easily than the other employees Her office is locat... View the full answer