Patrick MortonAISCase 5-21) The first area that may be exposed to fraud is in purchasing raw materials. If raw material deliveries fall behind, managers are given the authority to purchase materials themselves. Since they use a computerized system, Lexsteel does not take an inventory count, leaving the door open for fraud. There should be a check in order to make sure the manager is actually buying what he says he is buying, by matching receipts with invoices.When there are insufficient funds to pay all the invoices, the treasurer retains the checks until all of them can be paid. This leaves too much room open for him to commit some form of fraud by possibly altering the checks for his own use. Someone other than the treasurer should account for these checks. Also, there does not seem to be a computer password protection in place. This would allow anyone working in the office to access important company information. A
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