Question

CASE STUDY TO DISCUSS:

John MacIntosh, a payment clerk for Deep Water, creates a company called ABC Enterprises. ABC Enterprises then proceeds to issue invoices to Deep Water, where John is responsible for approving and paying them. Several invoices, valued at several thousand dollars, are processed and paid by Deep Water, with the money going to MacIntosh.

What control plans can a company put in place to detect and control for this type of event?

Answer 1

Following are the control plans a company can put in place to detect and control for this type of event :

1. there must be two person, one for putting transaction and another one for approving the transaction, for all transactions.

2. there must be yearly audit process for checking of all invoices with actual work done.

3. company must ask all staff in financial positions to declare there assets and liability to the company at the end of year.

4. reporting authority in the company must be asked to check all transactions approved by his staff on monthly basis to curb such malpractice.

5. every staff in the financial position must have limit on approving amount, for example, junior clerk can approve upto $100, senior clerk can approve upto $200 and so on.