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ACC00718 Understanding Steps Used by Organization to Lower Discrepancies in Process Assessment 2 Answer

ACC00718 - Assessment Task Two – Session One 2019

Scenario “A”

A major Australian Public Company ran promotions advertising for a number of its products through a promotions company. The promotions company falsely inflated the number of responses it received from purchasers of the company’s product. The false number of respondents was invoiced by the promotions company to the public company resulting in the overpayment of thousands of dollars. The records kept by the promotions company were those on its computer database as well as manual batch numbers of responses to the promotions.

REQUIRED  

Identify five (5) procedures and checks that would have reduced the risk to the victim company?

Scenario “B”

You were engaged to conduct an examination on an Australian subsidiary of an American company following a discovery by the financial controller that freight and travel expenses were too high during a certain period. You have found the following:

 The entries posted to the general ledger were examined and it was found that whereas normal expenses would be $10,000 to $12,000 for a particular month, they were in fact $33,442.19. Entries posted to the freight account were checked and in some cases there were no corresponding invoices.

 Staff were frustrated in their efforts because the trade payables clerk, who was responsible for the payment of accounts and cashing of wages cheques, was either off sick or evasive when questioned.

 The system for the payment of accounts was that the trade payables clerk would prepare a cheque to pay an invoice and would then present the cheque with the invoice and relevant documents for signing by two authorised signatories.

 All company accounts were paid by cheque; the only cheques used to obtain cash were wages cheques. This would be done by stamping the reverse of the cheque with the words, ‘Please pay cash’; the trade payables clerk would then present the cheque to the bank and obtain the cash. Specimen signatures were, of course, held at the bank but they were rarely checked as the trade payables clerk was so well known to bank staff.

 Duplicate cheques had been issued for payment of accounts already paid by the company and cashed at the bank by the trade payables clerk. The signatures on the cheques were, in some cases, forgeries and, in other cases, genuine (obviously people were signing things without due care). A payment of $6,217.60 was used to pay a travel company for a trip for two to Tahiti — the clerk had cancelled this entry with the words, ‘OK paid by me’.

When questioned, the trade payables clerk said that she had used her own cheque to pay for the travel. You checked with the travel company and found that, in fact, a company cheque had been used for the trip. You and officials of the company called in local detectives and all parties adjourned to the local police station. By this time, it was outside office hours and police were unable to contact the travel agent themselves and had no documentation to rely on to negate the clerk’s story. The clerk was released for further investigation by them, but the clerk left the country and is now living happily in Greece, $164,000 richer.

Required

1) Identify and discuss which internal control could have prevented this fraud and give five (5) examples

2) Identify and discuss five (5) procedures could have alerted the auditor to the fraud? 

Assessment Task Two - Marking Criteria

Marks will be awarded for:

1.         Understanding and discussion of the topic (30 marks).

You are expected to answer each of the questions contained in the assignment. You’re answer should fully address the requirements of each question and be in your own words.

Simply restating the contents of the text book, study guide or PowerPoint slides does not show individual understanding of the topic.

Your answers should contain enough discussion on the question so as to clearly demonstrate your understanding of the topic area and provide sufficient detail which answers the questions to a satisfactory level.

There are no minimum word limits placed on assignment questions, however it is expected that most questions will require approximately 50 to 100 words of readable, logical and verifiable information.

2.         The extent and depth of research undertaken (-2 marks)

Your answers should show wide reading related to the question being answered. This would extend beyond the textbook to other texts, newspaper and magazines. Specific resources from the Internet could also be used. The Harvard Referencing style is the required referencing style for this assessment. (refer http://scu.edu.au/library/index.php/14). Your assignment should also include a Reference List / Bibliography identifying the extent of the research undertaken. Failure to demonstrate extended research or provide a Reference list can result in the loss of up to 2 marks.

3.         Presentation: overall look, format (including page breaks between questions), written content and the inclusion of title page stating your name, student ID, Assessment identification, and due date. (-3 marks)

Your assignment should have a professional presentation with appropriate use of headings and sections and appropriate use of spelling, grammar and referencing. Marks may be deducted for excessive incorrect grammar, spelling and failing to have a page break between questions. Failing to include a Cover Sheet will result in lost marks. 


AssessmentGroup/
individual
Learning outcomesGrading indicatorMin ScoreWeightLength/
duration
DueProfessional accreditation
Short written responseIndividual4, 5GradedN/A30%Individually determined


Answer

Introduction 

This report brings out a discussion on understanding of steps used by the organisation and audit procedure in order to lower down the discrepancies in process. At the initial stage, a set of procedure and other main steps will be used to reduce the risk to the Australian company (AICPA, 2017). Further, with the help of proper checks, it is important to assert the control the uncertainty that is associated with the transaction for the business promotion. In another scenario, many internal control systems are utilised by the organisation in order to reduce the errors and other frauds that are discussed in the process (AICPA, 2017). 

Answer-1

As per the first scenario

Five procedures and monitor checks has been used to assess and minimise the risk to the victim of the company- 

  1. Calculation in relation to yield on marketing investments- This resolution is associated with profit for the advertising projects that standout between the severe most troubling checking programs in order to reduce the uncertainty associated with the Australian listed company. Return on marketing investments is a general new measurement, which is valued by the advertising commitment inferable so that it can estimate the budgets associated with the cash outflows and cash inflows (Bailey, Collins, and Abbott, 2017). It remain isolated by promotional contribution and the gambling. It assists the APC (Australian public corporate) so that it can set the estimations in order to record the financial transactions recorded in the accounting books. Along with these, there are several issues in return on marketing investment, which is utilised to decide several different less unmistakable types of the advertising feasibility (Eugene et al., 2018).

For instance- 

Return (calculated by ROMI and invested capital)1,50,000
Invested capital$1000000
ROMI15 percent


  1. Representation of ROI (rate of return) - it is a type of another check used to appraise APC (Australian public company), which deals with the benefits in the whole process. This reflects cash inflows, cash outflows, invoices, and the assessments, which are very particular to the return process (Lennox, Schmidt, and Thompson, 2018). For instance- it is important to evaluate rate of return of last year from the particular branch, which will delegate an idea by assessing the recorded things in the financial statements. Finally, it will set an estimation for the expenses that is too made by the organisation (Hartl et al., 2016)

For example-

Invested capital$500000
Rate of return 15 percent 
Return 40,000

    

  1. Examination of the purchase invoices and other more factors associated with the transactions- when examining the advertising executor, companies often measure the results from the perspectives of the purchasers, incorporating the promotional exercises, examines for the endless span of time and finally meet the specialised and factual criteria, which is expected as per all the estimation frameworks. For example- invoices, other books, and bills (Si, Fonseka, Tian, and Feng, 2017)
  2. To find the appropriate KPIs and other factors associated with the business- while quantifying the adequacy of presenting the exercises where KPIs are coordinated in the business and the board of the company (Griffith, Nolder, and Petty, 2018)
  3. To check the kind of operational scale of the business and its assertion risk of the procedure- in order to guarantee the important correlations between the exercises where companies uses a typical scale and estimated mistake that can be evaluated with the aim where the evaluators should respond to the changes in the conditions (Griffith, Nolder, and Petty, 2018). While maintaining the business scale and asserting the risk, it is seen that it will align the business consequences and evaluate the audit procedure that is nearly based on audit model. This model will help in assessment of the control risk, detention risk, and inherent risk, which is associated with cash flow, and outflow of business (Berglund, Eshleman, and Guo, 2018).

Answer to second scenario-

Several internal controls system that would be utilised by the organisation to minimise the errors and fraud in process-

  1. Management should continuously review new general ledger accounts and the journal entries by including the supporting documentation when the journal entry is recorded (Rahim, Jaafar, Syamsuddin, and Sarkawi, 2017)

For example- An automated system of invoice approval in organisation is as per the level of delegation. Authorising general ledger will remain an entitlement to the preventive control (Ryan, Doster, Daily, and Lewis, 2018)

  1. Due to mismanagement or misconducting, it is seen that a person often do not present cheque at bank. In this case, cheque must be represented to the bank in the name of whose it is written. Fraud presented among the accounts payable might have avoided as he would have written in his name (Ryan, Doster, Daily, and Lewis, 2018)
  2. Issues related to duplication of cheques may result in double payment. In order to resolve this, there must be separate person (in charge) to handle the bank works. All the related transactions regarding payment, authorisation, and its updating must be on the same day (Ryan, Doster, Daily, and Lewis, 2018).
  3. Proper documentation is necessary for each transaction. This documentation will lead to assist in providing guilty to clerk on the timely basis (Ryan, Doster, Daily, and Lewis, 2018).
  4. Proper reconciliation must be recorded properly for all the items of the book of accounts that will support the overall process of the company (Ryan, Doster, Daily, and Lewis, 2018).

Answer to question-2 (b)

There can be five procedures, which can become an alert to the auditor while researching for fraud-  

Obtaining of exact schedule for the bank accounts and its reconciliation to the ledger-

  1. Agree to the exact applicable amounts from cash scheduling accounts and its recording in the ledger and finally tracing the significant items that need to be reconciled which can support the documents. 
  2. In order to get the reconciliation of the selected transaction that affect selected accounts while transferring it to the ledger. Preparation of standard confirmation requests of selected bank accounts. Under the control, mail confirmation is necessary and at the same time determine the appropriate requests so that they can be addressed and plea to send all the replies directly to the office. For instance- obtaining the audit proofs for the accuracy and completeness from the organisation (Elefterie, and Badea, 2016).   
  3. Compare the replies between the bank and books of accounts and pass required reconciliation entry if needed (Elefterie, and Badea, 2016). This can be done by using inherent, detention risk and the control, which is associated with procedure. After agreeing to the report replies to record appropriately and to ledger (Elefterie, and Badea, 2016)
  4. It is important trace the items in order to support the documents. For the confirmation that is not, received, tracing the outstanding items need reconciliation of the transactions to subsequent bank statements prepared monthly. For those transactions that are not traced, it is important to trace them to the cash disbursements recordings for the time before the balance sheet is prepared (Roberts et al., 2018).  
  5. Determine any system and the process at the places where facilities gets the electronic confirmation between the respondent and the organisation. We had plan to rely on a confirmation process by assessing the designing and operating efficiency of the manual control and electronic in respect to banking procedure (Sunarya, Nurhaeni, and Haris, 2017)
  6. It is important to infer the main procedures so that the chances of the fraud can be minimised. While reducing the chances, it is seen that they can align with the business framework reporting efficiently (AASB 110, 2015).  

Conclusion

From the above assessing report, it is seen that in both the scenarios, the company should surely comply with the effective internal control system so that it can sustain in long run. First scenario clearly lays that the organisation can easily the risk associated with the chance of losing money if the organisation will conduct only one given procedure. One of the best internal control system that can be used by the organisation can be hiring the internal auditors that will finally evaluate certain changes and other problems in framework. AT the end, it is necessary to know that the company should focus on its audit method and other procedure while setting the assertion in order to lower the risk associated. For both the cases given, audit risk model will be used by the organisation.    

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