3A Indicate how Schoff could improve each of these procedure

External al auuit Audit to thåt of an internal adit. LO7 and Fraud Explain why the external audit is not considered a fraud audit. a fraud audit. (Appet (Appen ?07 PROBLEMS-SETA Internal Control Regent Company encountered the following situations: LO2, n who opens the mail for Regent, Bill Stevens, stole a check from a customer a. cashed it. To cover up the theft, he debited Sales Returns and Allowances and credited Accounts Receivable in the general ledger. He also posted the amount to the customer\'s account in the ac- counts receivable subsidiary ledger. The purchasing agent, Susan Martin, used a company purchase order to order building materials from Builders Mart. Later, she telephoned Builders Mart and changed the delivery address to her home address. She told Builders Mart to charge the material to the company. At month-end, she approved the invoice from Builders Mart for payment. b. c. Nashville Supply Company sent two invoices for the same order: the first on June 10 and the second on July 20. The accountant authorized payment of both invoices and both were paid. n January 1, Jack Monty, a junior accountant for Regent, was given the responsibility of record- ing all general journal entries. At the end of the year, the auditors discovered that Monty had made 150 serious errors in recording transactions. The chief accountant was unaware that Monty d. O had been making mistakes. Required For each situation, describe any violations of good internal control procedures and identify the steps that you would take to prevent each situation.

Solution

a.The person in charge of opening the mail of Regent, violated the professional ethics and trust generated by the company. The theft transactions and records generated can be reversed by accepting the fraud to the company and the customer, the control and procedures of the accounts receivable is not being done correctly. The measure that must be taken is in the control of the registry of accredited operations and loaded in general ledger.

b. The purchasing agent, Susan Martin. Lack of professional ethics, control and supervision of the company. By using the name of the same for the purchase of construction materials and the serious fault committed by Builders Mart. For the support in the generated operations. The measures that must be taken, is a total procedure by hierarchical levels.

c. Nashville Supply Company, made the mistake of sending invoices for the same order, the purchasing area or logistics department, did not comply with the documentary supervision and the accountant did not take greater importance in controlling the outflows of money, generating a payment in excess for the same order. The measures that must be taken is a strict control in the operations of authorized purchases and payments.

d. The chief accountant did not supervise Jack Monty, Regent\'s junior accountant. Omitting responsibility for supervision and control of the area. If Jack Monty recorded all the general journal entries and this had been controlled and monitored, the auditors would not have discovered errors in the transaction log.

a.Schoff instructs its customers to send payment checks to its street address, 619 Main Street, Scottsdale, Arizona.

b.Schoff does not provide a remittance advice to its customers for return with
payment checks,

d.The mailroom prepares a remittance list of all the checks received and files the only copy of the remittance list in a mailroom file cabinet.

c.Checks are endorsed by the treasurer\'s office just prior to sending the checks to the bank for deposit.

e.The checks are sent to the controller\'s office. The controller\'s office uses the checks to post the accounts receivable subsidiary ledger and prepare the journal entry to record cash receipts. The checks are then sent to the treasurer\'s office.

f.The treasurer\'s office prepares the deposit slip (two copies) and sends one copy and the checks to the bank. The other copy of the deposit slip is filed in the treasurer\'s file cabinet.

g.The bank statement is sent to the controller, who prepares the bank reconciliation.