Question

John, the accounting manager of LargeInventory, Inc., is trying to catch up on his work after having just returned from an absence under the Family Medical Leave Act (FMLA). While examining the bank reconciliations prepared by an employee during his absence, James noticed some anomalies—a deposit in transit that is more than 80 days old and several cleared checks with the same check number. John is more than curious about the identical check numbers. He logged onto the firm’s online banking system to check the details for each check. John fails to recognize the payees on three of the checks. John looks into the deposit in transit that is more than 80 days old and learns that it consists of one check from an unknown payee. Explain your answers to the questions below in cogent, logical sentences that provide full explanations.

a. What type of scheme is John investigating? Explain in detail. No bullets.

b. Name at least three major tests John would have to conduct to identify this scheme. Bullets allowed.

c. Discuss at least ten other tests for the type of schemes John is investigating. Bullets allowed but not preferred.

Answer 1

1. Jhon is verifying the adjustments made in the Bank Recolcilation when he was on leave and is trying to identify what are some unusual transactions appearing and made by the other employee.

2. The three test jhon would conduct are as follows :

a. He will verify that how can a check have same number. He will have to verify the bank statement and scrutinze the same.

b. He will have to verify the each adjustment made for Deposit in transit for more than 80 days and see that all parties are genuine and if there are some unknown parties he need to scrutinize and verify the nature of that transaction.

c. He should also check that all entries are being done with proper maker checker and if there are suspicious entires then he shall verify the supportings for the same.