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CASE 5 : THE Coryell County Tax Assessor-Collector (TAC

)
office

Question

1. Identify the internal control weaknesses that appear to be in the Tax Assessor-Collector’s office. What types of
recommendations would you make to improve the identified weaknesses.
2. What “red flags” could you note, based on the above information that could arouse suspicions that some type of
fraud or embezzlement could have been occurring? Why do you suppose that the employees within the county office
failed to place much emphasis on these “red flags”? As a state auditor, what would you recommend to try to prevent
future occurrences of this situation?
3. Prepare a graph (bar graphs x-y format, etc.) to compare the known funds claimed by the Wilsons versus the
withdrawals made against the joint bank account. What does this graph suggest to you? (Note: if possible, it is
recommended that you do the graph using appropriate computer software).
4. Dr. Charles Wilson, in his defense, argued that he was unaware of the embezzlement being perpetrated by his wife.
What information can you determine from the case to refute his argument?
5. It appears that this county office did not have an internal auditor on its staff. In fact, the state did not conduct any
audit work until the embezzlement was discovered. Do you think that an internal auditor might have been able to
uncover this fraud? If so, how do you think that the internal auditor would handle the situation

Solution
1. Internal Control Weakness

Internal Control Weakness Problem / Threat Suggestion Control

The form input or form is also who are collect the transaction record a transaction should be conduct cash separate by a person who collect the cash.The person who cash is also person who conduct collect and deposit the cash to the bank the reconciliation should be separate with the person who conducts the reconciliation. The deputy (Joan Wilson) should be only can collect the cash and deposit to the bank and the reconciliation conduct by the director (Joan Blanchard) There is no separate person who Employee can change Make a copy of form (since it is 1993 and conduct data management again the form that there are no scan of document) to the data should be an archive file management or other employee and the and cannot be changed original kept by the deputy . The deputy (Joan Wilson) should be only can collect the cash and deposit to the bank and the input of transaction done by other employee The person who are collect the Theft of cash Segregation of duties .There are no oversight between There are no two way Make a Standard Operation Procedure to deputy and director because control so each person strict conduct a job on their position and no closely related relationship cannot conduct their job inappropriate task conduct from each person properly The person who are input the Manipulation of Segregation of duties .

she took the company checks (cash). The deputy can change Abusive action from the The deputy should not change the employee employee timesheet deputy timesheet. Then. By the information above. she did all the embezzlement to fulfill her own interests. to the director) or to the fraud suspicious action and internal auditor condition from their boss 2. used a postage meter for personal mail. The information told us that Joan Wilson (Chief Deputy) did all the frauds that classified by ACFE. and (3) corruption. some type of fraud or embezzlement could have been occurring by emphasis on arouse suspicions things such as: . For the asset misappropriation. She manipulated the cash sheet to cover her frauds. she also made a fraudulent statement. And of course the corruption. She could do this because she was the only one who handled all the reconciliation and all the cash-activities on the company. (2) fraudulent statement. and used business phone to make personal long distance calls. internal fraud divided into three categories: (1) asset misappropriation. Red Flags According to the Association of Certified Fraud Examiners (ACFE). Make an automatic clock time sheet so employee can tap the card from time in and time out in office and the deputy can only supervise the process of that There is no whistleblowing No early fraud detection Make an anonymous whistleblowing system system that inform directly to the because other employee so employee can share their concern to their director to report indication of already aware there are boss (in this case.

the company should adding internal auditor. Information to refute Charles Argument  Changes in his wife’s personal life and behavior like took a lot of trips to different locations during the year and during the summer.  In carrying out her function. To prevent future occurrences of this situation. Employees in County Office failed to place much emphasis on these “red flags” because there is no whistleblowing system that established in the company. carried the checks (money) to the bank. Chief Deputy got a minimum oversight from the Director  Director rarely to reconciled any of the accounting data in the reports to supporting detail documentation  Director allowed Wilson to take on the added duties and responsibilities  The Chief Deputy did all the cash-activities like input form. input the management data. Bar Graph 4. She didn’t have a professional skepticism mind while doing her job. Beside that the Director were closely related to the Chief Deputy who occurred the fraud. strengthening the internal control and establishing the whistleblowing system to the company. for them who was local chiropractor indicates that Charles must be known about his wife’s alterability. collected cash. reconciled. .  Did unusual things in Wilson’s performance like be very jealous and overly protective of the various tasks she performed  Changing in Chief Deputy’s behavior and her personal life. The Director was too naïve to believe 100% with Chief Deputy’s job. 3.  Wilson also made changes in cash sheet and told her employee that the changes had been made to correct the number in the reports that prepared by her employee.

especially if their boss conducts a fraud. These activities signify that Charles certainly knows about his family financial condition. In addition. 5. It cannot be detected because the employee fear to question about that and the Director is closely related to Chief Deputy so she will trust whatever the Chief Deputy’s done in the company. Role of Internal Auditor This case appeared because there are several weaknesses of internal control and there is no internal auditor who asses the internal control in the office. Internal audit as an independent party can conduct the audit to detect suspicious action and assess the internal control especially we can see that Chief Deputy conduct so many jobs.  Both Wilsons (Joan and Charles) committed themselves to various obligations during these same periods. insurance. On the average.  Early in 1993. . The employee who knows the indication of fraud can tell to the internal audit so they can conduct further investigation. payments. car. Internal auditor would help the Director to detect indication of fraud as early as possible because the Chief Deputy conducts an action that clearly can be seen as fraud. the recurring monthly payments for home mortgage. internal audit staff can obtain a report from the employee to run a whistleblowing system. The Chief Deputy would be disinclined to conduct the fraud by herself if there is an internal audit staff in the company. Charles Wilson prepared and filed a personal financial statement that showing personal income and cash flows for the year ended 1992 and projected income and cash flows for the year ended 1993. Moreover. etc.976 per month where their average net paycheck seems not meet their obligations. were $5. This information shows that both Wilsons need additional income to fulfill their liabilities. there is no whistleblowing system that provides the employee to express their concern about fraud.. credit card.

but also internal auditor could give recommendations to make the company run the business effectively and efficiently. . To sum up. internal auditor not only could do many functions related to monitor and evaluate the internal control in the company in terms of fraud.