Question

You are a forensic accountant and just been hired by MacEwan University (“MU”) to investigate possible fraud relating to parking revenue. Your first task is to deal with a pressing issue related to the controls in the new parking access system for the new parking lot (this is the first time the university will charge for parking).

MNU has signed an agreement with All Access Inc (AAI), a third-party service provider, to lease the parking access system for three years. AAI will provide electronic access cards to MU for all students, staff, and faculty that wish to use the parking lot. The cards contain a computer chip that when scanned at the parking lot entrance will open the parking gate and record the time of entry. At the time of exit, individuals will scan their card again and the time of exit will also be recorded. The individual will be charged $0.50 per hour, rounded up to the next hour.

At the end of each day, the AAI system will feed data directly into MU’s existing accounting system, recording parking fees in a new Parking Revenue account. The related charge will be billed to the account of the student or will be deducted from the faculty or staff member’s next paycheque.

The access cards will be sold at MU’s Bookstore for $10 each. The amount will be refunded upon the card’s return to the Bookstore. The Bookstore manager explained that the cards will be displayed at the check-out counter and will be rung into the cash register as Refundable Deposits. When an access card is purchased, the purchaser will fill out a form indicating their faculty, staff or student identification number so that each individual card can be matched to a specific faculty, staff member or student. These forms will be sent to MU’s administration department and will take about a week to process. However, this will not inconvenience the purchaser because all the cards in inventory will be active and available for immediate use at the parking lot.

Each department at MU (Geography, English, History, etc.) will also receive three cards that it can distribute to visitors for free parking while on campus. The $0.50 per hour for these cards will be posted to both Parking Revenue and a Miscellaneous Expense account when scanned at the parking lot.

Required:

Describe four (4) significant risks related to the new parking system. For each risk identify a potential control that would mitigate/address each risk.

Answer 1

1) Parking cards are not matched with the vehicle numbers as such anybody can use a different persons parking card to park their vehicles. This may also include outsiders.

2) The 1 week time may be a time of no-billing since these charges would not be assigned to any student or faculty. The billing would start only after the 1 week time wherein charges will be posted to unknown accounts.

3) The 3 cards for visitors cannot be counted as revenue. As such the revenue would be overstated (Though it would be reduced by miscellaneous expense) which is not a good practice.

4) There does not seem to be a barrier while exiting. As such users can swipe their cards only while coming in and swipe it again the next day. This would derail the system. A barrier needs to be present even at exit.