Ma. Theresa A.

Aclan AudApp1 3:30-5:00 MTH

45022 August 24, 2021

A) Creating fake vendor accounts

Robert is an employee of the Friday Co. for the past 10 years. He is one of the outstanding and most
trusted employee because of his excellent performance and loyalty to the company. If you would look at his
salary, it is big enough to satisfy all his needs, provide for his family and to save for future. Friday Co. produces
goods to sell in the market and they only picked few suppliers to support their production. As time goes the
number of suppliers are increasing, one of Robert’s co-worker have noticed this but Robert immediately said that
the additional suppliers have been approved by the management. Days passed numerous payment were sent
to every supplier. But one day, one of their bosses, Ms. Pepper insisted to deliver the checks to their suppliers since
they will all meet for a meeting. Upon seeing the checks, Ms. Pepper noticed that there are checks named on
suppliers that she is not aware of and the amounts for the checks are amounting to P20,000 for each 3 unknown
suppliers. Quickly, she called an employee meeting to address the issue. The problem was told to the employees
and the co-worker quickly pointed out that Ms. Pepper assures him of the suppliers when he first saw it. Robert
did not deny this. Proper investigation have been done and this reveals that Robert personally pay every supplier
in cash every month and he is also the one who was manipulating the amounts on the books. The payments for
the fake suppliers are deposited on a bank which he owns and he is doing this for almost a year now and his
explanation was, all the cash are used to buy additional items for his shoe collection. Robert was fired by the
management, subject to P150,000 fine and his actions was reported to the PRC.

Internal Control to prevent creating fake vendor accounts

 Establish a segregation of duties.

 Establish an anonymous fraud hotline for employees and others to report irregularities.

B) Fraudulent Disbursement

Government offers different position in their multiple offices. Bucky, the one who handles the payroll for
all the government employees ensures that all are accurate. Unfortunately, Bucky needs to move abroad. Steve,
another employee, was appointed in exchange of Bucky. He is a fast learner which is why it is easy for him to be
familiar on how the system goes. One day, he decided to insert names in the payroll for his own purposes. At
salary day, Steve claimed all the payments for this ghost employees. He continuously did this for over a year. He
only got caught when their department head notices the unknown employees.

Internal Control to prevent fraudulent disbursement

 Use a system of checks and balances to ensure no one person has control over all parts of a financial
transaction.
 Require authorized signatures or codes for every change in the employee list.

C) Cash Skimming

Bruce was assigned as a treasurer in an organization which aims to help people after typhoon thru giving
food, water and alternative shelter. A strong typhoon hit their province on December and they needed
volunteers to conduct the community service but only few were available. With this situation he was also assigned
to be the one to receive donations and to record the amounts. While all were busy packing the goods to be
delivered in different municipality, Bruce was also busy accepting donations and slashing down the amounts
before recording the donations. All were aware of the amounts since it was posted in the bulletins as a gratitude
for all who donated. Day before the last relief operation, one of the donors visited the site and saw that he only
donated P500,000 when in fact he donated P650,000. He reported this to the whole team and this is when Bruce
was caught. The donor recognized that it was Bruce who received the money. Bruce admit the judgment. He
was pull out of the team and obliged to return the missing amount.

Internal control to prevent cash skimming

 Establish a segregation of duties.

 Maintain a viable oversight presence at any point where cash enters an organization.


D) Stealing cash from the register

In a grocery store is where Scarlett works as a cashier, cash in very important. They count and record cash
every after store hours. Scarlett was the one who counts and records the amounts. The store owner trusts her
employees and let them do their work. Beyond their knowledge, Scarlett is always stealing cash before recording
the earnings. Then one day, the owner decided to add cctv’s in every part of the store. Scarlett is aware of this
but she can’t stop herself from getting cash in the register. At that time, the owner witnessed what she was doing
and quickly fired Scarlett from the job.

Internal control to prevent stealing cash from the register

 Monitor for unusual transactions.

 Establish a segregation of duties.