Share
Explore BrainMass

Fraud Opportunities

Simon Blfpstk Construction Company has two divisions. The president (Simon) manages the roofing division. Simon delegated authority and responsibility for management of the modular manufacturing division to John Gault. The company has a competent accounting staff and a full-time internal auditor. Unlike Simon's procedures, however, Gault and his secretary handle all bids for manufacturing jobs, purchase all materials without competitive bids, control the physical inventory of materials, contract for shipping by truck, supervise the construction activity, bull the customer when the job is finished, approve all bid changes, and collect the payment form the customer. With Simon's tacit approval, Gault has asked the internal auditor not to interfere with his busy schedule.

Discuss the situation in terms of internal control and identify fraud that could occur.

Solution Preview

There is no segregation of duties in Gault's division. He and his secretary handle all bids, purchase all materials, control inventory, contract shipping, and supervise all construction activity. We never want one person or a small group of ...

Solution Summary

This solution discusses the scenario from a fraud and internal control standpoint. The possibilities for fraud are outlined and the reasons why this is (or is not) possible are discussed.

$2.19