Page 170 - Accounting Information Systems

CHAPTE R 3 Ethics, Fraud, and Internal Control 141

c. Cash Accounts Receivable a. transaction authorization.
d. Sales Returns Accounts Receivable b. supervision.
e. None of the above c. accounting records.
5. Which of the following controls would best pre- d. independent verification.
vent the lapping of accounts receivable? 8. Which of the following is often called a compen-
a. Segregate duties so that the clerk responsible sating control?
for recording in the accounts receivable subsid- a. transaction authorization
iary ledger has no access to the general ledger.
b. supervision
b. Request that customers review their monthly
c. accounting records
statements and report any unrecorded cash
payments. d. independent verification
c. Require customers to send payments directly 9. Which of the following is NOT an element of the
to the company’s bank. fraud triangle?
d. Request that customers make checks payable a. ethics
to the company. b. justifiable reliance
6. Providing timely information about transactions in c. situational pressure
sufficient detail to permit proper classification and d. opportunity
financial reporting is an example of
10. The fraud scheme that is similar to the ‘‘borrowing
a. the control environment. from Peter to pay Paul’’ scheme is
b. risk assessment. a. expense account fraud.
c. information and communication. b. bribery.
d. monitoring. c. lapping.
7. Ensuring that all material transactions processed d. transaction fraud.
by the information system are valid and in
accordance with management’s objectives is an
example of

Problems

1. FRAUD SCHEME he does not make a financial payment to the agent. If
the contractor does not cooperate, the contractor will be
A purchasing agent for a home improvement center is
denied future work. Faced with a threat of economic
also part owner in a wholesale lumber company. The
loss, the contractor makes the payment.
agent has sole discretion in selecting vendors for the
lumber sold through the center. The agent directs a dis- Required
proportionate number of purchase orders to his com- What type of fraud is this and what controls can be
pany, which charges above-market prices for its implemented to prevent or detect the fraud?
products. The agent’s financial interest in the supplier is
unknown to his employer.
3. MAIL ROOM FRAUD AND
Required
What type of fraud is this and what controls can be INTERNAL CONTROL
implemented to prevent or detect the fraud? Sarat Sethi, a professional criminal, took a job as a mail
room clerk at Benson & Abernathy and Company, a
large department store. The mail room was an extremely
2. FRAUD SCHEME hectic work environment consisting of a supervisor and
A procurement agent for a large metropolitan building 45 clerks. The clerks were responsible for handling pro-
authority threatens to blacklist a building contractor if motional mailings, catalogs, and interoffice mail, as