Southern New Hampshire University
Module One Homework
Find an ar cle online that addresses fraud within a company (for example: "Bookkeeper caught embezzling from local plumbing company"). Respond to the following ques ons. Please answer in paragraph format in one to two pages. Include a link to the ar cle at the end of the paper.
1. What items on the balance sheet were a ected by this fraud? Committing this type of fraud, would definitely have a impact on the balance sheet of
the organization. Both owner's equity and assets would feel the effects of the theft by the
employee. Cash and inventory, and capital assets are ones that come to mind immediately
in regard to specific accounts that are affected. The reconciliation of the statements and
books that are kept by the organization would not balance out. Once the theft has been
caught by the organization, they would need to generate an account for the theft, which
would be considered an expense account. The newly generated account would affect the
previously mentioned areas, however by creating the new account, the finical books and
statements of the organization would be able to balance out properly
2. Based on the seven elements of internal control from the lecture, discuss what controls might have been missing. One of the most important things that I had learned last term in Auditing Principals is
how important internal control are in an effort to minimize fraud as much as possible
The usage of internal control is critical in order to help protect the organizations financial
health and reduce the opportunities for fraudulent activities to occur within the
organization. While that article does not mention anything directly, one of the things that
was mentioned in Auditing Principals and by Bragg (2011) is a separation of duties,
which is an important part of an organization's internal controls. As the bookkeeper has to
Southern New Hampshire University
much access, writing the checks and doing the reconciliation, which is why she was able
to do the fraud for almost seven years.
> Segregation of Duties -- This type of control says that certain individuals will have
access and authority to write checks on the organization, use a company credit
card, and pay other bills on behalf of the organization. A different individual will
then do the verification and reconciliation of credit card statements, bank
statements, and receipts. Neither person has access or authority to complete task
on both sides of the equations. Had this been in place, the organization would
have caught the fraud much sooner.
3. What steps could have been taken to prevent the fraud that was perpetrated? When an organization does an interview and completed the onboarding process, you really never know about a person completely. They can have a great background and have great references, and still not be good for a job involving money. However, if they would been previously caught, the employer may have only asked for payment back and not fil