PROBLEM: The cashier had custody of the checks and was responsible for posting (recording) to the accounts receivable ledger.
SOLUTION: Custody of the checks and posting to the Accounts Receivable Ledger should be organizationally independent. In addition, there should be an independent reconciliation of the three items:
dollar amounts of the checks received
dollar amounts of the checks deposited in the bank
dollar amounts credited to customer accounts.
Several customers returned clothing purchases. Instead of putting the clothes into a return bin to be put back on the rack, a clerk put the clothing in a separate bin under some cleaning rags. After her shift, she transferred the clothes to a gym bag and took them home.
PROBLEM: The clerk was authorized to accept the return, grant credit, and had custody of the inventory. It is also possible that the clerk may have had responsibility to record the returns, but did not do so to cover the theft.
SOLUTION: All purchase returns should be documented by preparing a customer receipt and recording the return in a purchase returns journal. No cash or credit can be given without the return being authorized by a supervisor and recorded in the data files recorded in the cash register.
The purchase returns area should be kept clean and orderly so that returns cannot be "hid" among excess returns. Employees should not be allowed to have gym bags or other personal items that could conceal stolen items in work areas.
A receiving clerk noticed that four cases of MP3 players were included in a shipment when only three were ordered. The clerk put the extra case aside and took it home after his shift ended.
PROBLEM: The receiving clerk had custody of arriving goods, counted the goods, and compared the count to a purchase order. The problem is that, while the receiving clerk did not record the purchase order, she did have access to a document that showed the amount ordered. This allows her to steal any excess items shipped without having to record anything to conceal it.
SOLUTION: Purchase orders sent to the receiving area should not indicate how many items or cases were ordered, thus helping ensure that all shipments are counted and recorded. The purchasing department should reconcile items received against items ordered.
An insurance claims adjuster had check signing authority of up to $6,000. The adjuster created three businesses that billed the insurance company for work not performed on valid claims. The adjuster wrote and signed checks to pay for the invoices, none of which exceeded $6,000.
PROBLEM: The adjuster had authorization to add vendors to vendor master file, authorization to write checks up to $6,000, and had custody of the signed the checks. Apparently, the adjuster also had some recording duties (maintaining the vendor master file).
SOLUTION: The functions of signing checks for invoices, approving vendors, and maintaining the vendor master file should be organizationally independent. Payments should not be made to anyone that is not on the approved vendor list. Controls should be put into place to endure that employees cannot add an unauthorized or unapproved vendor to the vendor master file.
i. An accounts payable clerk recorded invoices received from a company that he and his wife owned and authorized their payment.
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