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Chap008 Solution Manual

2 more than one-quarter of fraud cases caused at

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Unformatted text preview: 2. More than one-quarter of fraud cases caused at least $1 million in losses. 3. Companies lose 7% of their annual revenues to fraud; this 7% figure translates to $994 billion in fraud losses. 4. The typical length of fraud schemes was 2 years from the time the fraud began until it was detected. 5. Companies that conducted surprise audits suffered a median loss of $70,000 , whereas those without surprise audits had a median loss of $207,000 . 6. The median loss suffered by companies with fewer than 100 employees was $200,000 per scheme. 7. Check tampering and fraudulent billing were the most common small business fraud schemes. 8. 35% of respondents cited inadequate internal controls as the primary contributing factor in the frauds investigated. 9. Only 7% of the perpetrators had convictions prior to committing their frauds. 8-37 Chapter 08 - Cash and Internal Controls Teamwork in Action — BTN 8-6 Common internal controls visible in a typical retail store include: 1. Door locks and roll-down screens for after-hours lock-up. 2. Electronic detection devices stationed at entrances or anti-theft devices on merchandise that must be removed by cashier with special equipment. 3. Security cameras. 4. Security guards. 5. Cash registers. 6. Separate cash drawers or transaction codes to identify clerks at registers. 7. Bar coding on merchandise. 8. Limited number of apparel items allowed in a dressing room. 9. Dressing room attendants. 10. A security safe on the premises. 11. Timeclocks. 8-38 Chapter 08 - Cash and Internal Controls Entrepreneurial Decision — BTN 8-7 1. Seven principles of internal control along with examples are: a. Establish responsibilities . The clerks at the counter should be responsible for handling cash. The other employees should be responsible for preparing the orders and helping customers. There also should be employees assigned responsibilities such as maintaining inventories, cleaning premises, clerical duties, locking doors, etc. b. Maintain adequate records . The clerks at the counter should enter all sales on the cash registers. The cash registers should include a locked record of all sales rung up for subsequent verification procedures. Other records should include those for inventories, supplies, payroll time records, and so on. c. Insure assets and bond key employees . The owner should acquire insurance for the employees and the physical facilities. Insurance should also be acquired for potential casualties such as a customer slipping on the floor. d. Separate recordkeeping from custody of assets . The employee who is responsible for food preparation and inventory should not be in control of the recordkeeping for the inventory. Similar separation should exist for all important assets. e. Divide responsibility for related transactions . The employee responsible for ordering inventory should be separate from the employee controlling inventory who should also be separate from the employee who pays for inventory....
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2 More than one-quarter of fraud cases caused at least $1...

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