Question

In this financial statement fraud, how and where do internal controls break down? Provide examples of specific internal controls needed to reduce this type of fraud.

Answer 1

In the lack of information i.e there is no financial statement provided we are not able to answer where the internal control breaks down.
However, below are the measures that can be taken to reduce the fraud in the organisation:
1. Use a system of checks and balances to ensure no one person has control over all parts of a financial transaction
2. Reconcile agency bank accounts every month.
3. Restrict use of agency credit cards and verify all charges made to credit cards or accounts to ensure they were business-related
4. Provide Board of Directors oversight of agency operations and management.
5. Prepare all fiscal policies and procedures in writing and obtain Board of Directors approval.
6. Ensure that agency assets such as vehicles, cell phones, equipment, and other agency resources are used only for official business
7. Protect petty cash funds and other cash funds.
8. Protect checks against fraudulent use.
9.Protect cash and check collections
10. Avoid or discourage related party transactions
Note-
Best effort have been made to answer the question correctly, in case of any discrepencies kindly comment and i will try to resolve it as soon as possible.
Please provide positive feedback.