Question

Betty and Tony Abscond have hired you to overview their Enterprise Resource Planning (ERP) system for their business Looking for Love? (LFL), an online dating site. They have requested this review as a result of a recent media release they read on the Australian Competition and Consumer Commission (ACCC) website titled "Scams cost Australians half a billion dollars": https://www.accc.gov.au/media-release/scams-cost-australians-half-a-billion-dollars Betty and Tony are concerned that clients may be potential targets for internal and external fraud based on this media release. As their ERP is more than 10 years old, they feel their internal controls are outdated and do not want you to review their current system of controls. Betty and Tony have requested that you focus your research on current threats to the online dating industry and methods of mitigation of these threats. The current process for new clients and accounts receivable at LFL is as follows: When a new client joins LFL they complete an online application entering all personal details and bank account details. As part of this application process the customer provides consent to debit the fees from their credit card. A range of different services apply, hence differing costs are associated with these packages. The client selects the appropriate services and acknowledges these fees are subject to change. Any employee in the new accounts team may create the new customer profile. Once the profile is entered into the system the dating matches are generated. The credit card details are forwarded to the accounts receivable clerk for processing. The information for each potential date is sent by email to the new customer to select a possible candidate. The information includes; name, date of birth, job title, hobbies and interests, suburb of residence, client ID, and a photo. If the customer wants extra information on their potential dates, they may contact the customer relationship team for this. The current process for accounts receivable requires the accounts receivable clerk to upload customers credit card details to the banking application for the monthly processing of client payments. The account receivable clerk will generate invoices and payment confirmations to distribute via email to customers. LFL has a number of business bank accounts, hence the ERP system allows the accounts receivable clerk to nominate bank account for receipt of credit card payment. Using the information provided to you, prepare a business report to Betty and Tony addressing the following: An overview of fraud in Australia. (1 Mark) Describe five (5) common forms of fraud that occurs over accounts receivable in Australia. (2.5 marks) Critical analysis of five (5) possible internal control weaknesses relating to LFL's systems that allow fraud to occur and the impact these weaknesses could have on the organisation. (2.5 marks) Recommendation of specific application controls LFL could implement to minimise the impact of each of the potential weaknesses you have identified above. Note that your client is seeking practical controls they can implement in the coming months, not theoretical controls; Following from the weaknesses and controls you have identified, prepare part of a document flowchart to illustrate the implementation of at least two (2) of these controls. As part of your flowchart: include at least two (2) relevant business areas (you do not need to document the entire process); and provide a short narrative of how the document flowchart captures the application of controls you have identified.

I already post this question but can you upload answer of 5. a and b.

Answer 1

1. Dating and romance scam is the second biggest loss-making fraudulent scheme. In 2018, the loss was already 60.5 million dollars. In order to take advantage of their victims, scammers use conventional and modern technologies. There are more male victims than female ones according to the report. The largest losses in terms of age was between the ages of 55-64.

2. Five Popular accounts receivables fraud

a. Lapping occurs when an employee uses another customer's or customer's allowance to offset the previous money he stole from the set. When detected, the process continues.

b. Kiting floats funds over two or more separate bank accounts by using the clearing time to prove that the money in the bank is either intact or complete.

c. Sales skimming means documenting the collection to a fake expense account and only taking the money from the suspect.

d. Non-recording of sales is often a way for the offenders to ignore the transaction and simply keep collecting the money. Typically these are done for cash sales.

e. Despite the invoice, closed receivable accounts that are not typically tracked usually accumulate the receivable balance of accounts. The perpetrator don't record the set in this system.

3. Internal weakness in management

a. There is no division of duties within the role of cash receipts. The account receivable clerk helps to produce invoice and payment confirmations

b. Without unique use, there are many bank accounts for LFL. There's a kitting chance.

c. Customers are given important date details, such as the date of birth which could be used for social engineering or customer scamming

d. Any employee can build a new profile of their customers. This could result in fake accounts that can be used for fraudulent schemes

e. The credit card has an automatic withdrawal for the fees. Since the employees know the credit card details, they could use them for personal gain

4. Duties should be separated especially in cash receipts. The business could also limit access to the creation of new accounts and restrict the customer data needed and the data given for the prospect date.

5. This is the guide to create a flowchat. To create the invoices and document the transactions, the accounts receivable officer should be the one. In the other side, the cashier will have access to the customers' purchases and will be the one to deposit or coordinate with the bank. The accountant must check the bank accounts and plan for bank reconciliation in order to track bank cash.

6. The sales team should also be involved since it is the one that coordinates with the customers. They do not have access to customers' credit card information. The accounting department should be the one that documents the transactions and needs invoice approval and traces the transfers to the bank.

7. Duty segregation is an essential control at the organisation. This would alleviate the possibility of fraud in the company. Not every person should have all of the three functions of a particular transaction (recording, handling, and monitoring).