Accounting Principles: Fraud, Internal Control, and Cash

Accounting Principles
Thirteenth Edition
Weygandt Kimmel Kieso
Chapter 8
Fraud, Internal Control,
and Cash
Prepared by
Coby Harmon
University of California, Santa Barbara
Westmont College
Chapter 8
Fraud, Internal Control,
and Cash
Chapter Outline
Learning Objectives
LO 1 Define fraud and the principles of internal control.
LO 2 Apply internal control principles to cash.
LO 3 Identify the control features of a bank account.
LO 4 Explain the reporting of cash.
Copyright ©2019 John Wiley & Son, Inc. 3

Fraud
Dishonest act by an employee that results in personal
benefit to the employee at a cost to the employer.
Opportunity
Three factors that
ILLUSTRATION 8.1
contribute to Fraud triangle
fraudulent activity.
Financial Pressure Rationalization

LO 1 Copyright ©2019 John Wiley & Son, Inc. 4
The Sarbanes-Oxley Act
• Applies to publicly traded U.S. corporations
• Required to maintain a system of internal control
• Corporate executives and boards of directors must
ensure that these controls are reliable and effective
• Independent outside auditors must attest to the
adequacy of the internal control system
• SOX created the Public Company Accounting
Oversight Board (PCAOB)

Internal Control
Purposes of internal control:
1. Safeguard assets.
2. Enhance the reliability of accounting records.
3. Increase efficiency of operations.
4. Ensure compliance with laws and regulations.

Internal Control
Five Primary Components:
• A control environment
• Risk assessment
• Control activities
• Information and communication
• Monitoring

Principles of Internal Control Activities
Establishment of Responsibility
• Control is most effective when only
one person is responsible for a given
task
• Establishing responsibility often
requires limiting access only to
authorized personnel, and then
identifying those personnel

ANATOMY OF A FRAUD
Maureen Frugali was a training supervisor for claims processing at Colossal

Healthcare. As a standard part of the claims processing training program,
Maureen created fictitious claims for use by trainees. These fictitious claims
were then sent to the accounts payable department. After the training claims
had been processed, she was to notify Accounts Payable of all fictitious
claims, so that they would not be paid. However, she did not inform Accounts
Payable about every fictitious claim. She created some fictitious claims for
entities that she controlled (that is, she would receive the payment), and she
let Accounts Payable pay her.
Total take: $11 million
The Missing Control

Establishment of responsibility. The healthcare company did not adequately
restrict the responsibility for authorizing and approving claims transactions.
The training supervisor should not have been authorized to create claims in
the company’s “live” system.

Segregation of Duties
• Different individuals should be
responsible for related activities
• Responsibility for record-keeping
for an asset should be separate
from physical custody of that asset

ANATOMY OF A FRAUD
Lawrence Fairbanks, the assistant vice-chancellor of communications at

Aesop University, was allowed to make purchases of under $2,500 for his
department without external approval. Unfortunately, he also sometimes
bought items for himself, such as expensive antiques and other collectibles.
How did he do it? He replaced vendor invoices he received with fake vendor
invoices that he created. The fake invoices had descriptions that were
consistent with the communications department’s purchases. He submitted
these fake invoices to the accounting department as the basis for their journal
entries and to accounts payable department as the basis for payment.
Total take: $475,000
The Missing Control

Segregation of duties. The university had not properly segregated related
purchasing activities. Lawrence was ordering items, receiving items, and
receiving the invoice. By receiving the invoice, he had control over documents
used to account for the purchase and was able to substitute a fake invoice.

ANATOMY OF A FRAUD
Chuling Song was an accounts payable clerk for Yanchang Construction. She
prepared and issued checks to vendors and reconciled bank statements. She
perpetrated a fraud in this way: She wrote checks for costs that the company
had not actually incurred (e.g., fake taxes). A supervisor then approved and
signed the checks. Before issuing the check, though, she would “white-out”
the payee line on the check and change it to personal accounts that she
controlled. She was able to conceal the theft because she also reconciled the
bank account. That is, nobody else ever saw that the checks had been altered.
Total take: ¥3,100,000
The Missing Control

Segregation of duties. The Yanchang Construction Company did not properly
segregate recordkeeping from physical custody. Chuling had physical custody
of the checks, which essentially was control of the cash. She also had
recordkeeping responsibility because she prepared the bank reconciliation.

Documentation Procedures
• Companies should use
prenumbered documents, and all
documents should be accounted
for
• Employees should promptly
forward source documents for
accounting entries to the
accounting department

ANATOMY OF A FRAUD
To support their reimbursement requests for travel costs incurred, employees at
Mod Fashions' design center were required to submit receipts. The receipts could
include the detailed bill provided for a meal, the credit card receipt provided
when the credit card payment is made, or a copy of the employee’s monthly
credit card bill that listed the item. A number of the designers who frequently
traveled together came up with a fraud scheme: They submitted claims for the
same expenses. For example, if they had a meal together that cost €200, one
person submitted the detailed meal bill, another submitted the credit card
receipt, and a third submitted a monthly credit card bill. Thus, all three received a
€200 reimbursement.
Total take: €75,000
The Missing Control

Documentation procedures. Mod Fashions should require the original,
detailed receipt. It should not accept photocopies, and it should not accept
credit card statements. In addition, documentation procedures could be
further improved by requiring the use of a corporate credit card (rather than
a personal credit card) for all business expenses.
Physical Controls
• Safes, vaults, and safety deposit boxes
• Locked warehouses and storage cabinets
• Computer facilities with passkey access or fingerprint
or eyeball scans
• Alarms to prevent break-ins
• Television monitors and garment sensors
• Time clocks for recording time worked

ANATOMY OF A FRAUD
At Centerstone Health, a large insurance company, the mailroom each day

received insurance applications from prospective customers. Mailroom
employees scanned the applications into electronic documents before the
applications were processed. Once the applications were scanned, they could
be accessed online by authorized employees. Insurance agents at Centerstone
Health earn commissions based upon successful applications. The sales
agent’s name is listed on the application. However, roughly 15% of the
applications are from customers who did not work with a sales agent. Two
friends—Alex, an employee in record keeping, and Parviz, a sales agent—
thought up a way to perpetrate a fraud. Alex identified scanned applications
that did not list a sales agent. After business hours, he entered the mailroom
and found the hardcopy applications that did not show a sales agent. He
wrote in Parviz’s name as the sales agent and then rescanned the application
for processing. Parviz received the commission, which the friends then split.

Total take: £240,000
The Missing Control

Physical controls. Centerstone Health lacked two basic physical controls that
could have prevented this fraud. First, the mailroom should have been locked
during non-business hours, and access during business hours should have
been tightly controlled. Second, the scanned applications supposedly could
be accessed only by authorized employees using their passwords. However,
the password for each employee was the same as the employee’s user ID.
Since employee user-ID numbers were available to all other employees, all
employees knew each other's passwords. Unauthorized employees could
access the scanned applications. Thus, Alex could enter the system using
another employee’s password and access the scanned applications.

Independent Internal Verification
• Records periodically verified by an employee
who is independent
• Discrepancies
reported to
management
ILLUSTRATION 8.3
Comparison of segregation of duties
principle with independent internal
verification principle

ANATOMY OF A FRAUD
Bobbi Donnelly, the office manager for Mod Fashions' design center, was
responsible for preparing the design center budget and reviewing expense
reports submitted by design center employees. Her desire to upgrade her
wardrobe got the better of her, and she enacted a fraud that involved filing
expense-reimbursement requests for her own personal clothing purchases.
She was able to conceal the fraud because she was responsible for reviewing
all expense reports, including her own. In addition, she sometimes was given
ultimate responsibility for signing off on the expense reports when her boss
was “too busy.” Also, because she controlled the budget, when she submitted
her expenses, she coded them to budget items that she knew were running
under budget, so that they would not catch anyone’s attention.

Total take: €275,000
The Missing Control

Independent internal verification. Bobbi's boss should have verified her
expense reports. When asked what he thought her expenses for a year were,
the boss said about €10,000. At €115,000 per year, her actual expenses were
more than 10 times what would have been expected. However, because he
was “too busy” to verify her expense reports or to review the budget, he
never noticed.

Human Resource Controls
• Bond employees who
handle cash
• Rotate employees’ duties
and require vacations
• Conduct thorough background
checks

ANATOMY OF A FRAUD
Ellen Lowry was the desk manager and Josephine Rodriguez was the head of
housekeeping at the Excelsior Inn, a luxury hotel. The two best friends were
so dedicated to their jobs that they never took vacations, and they frequently
filled in for other employees. In fact, Ms. Rodriguez, whose job as head of
housekeeping did not include cleaning rooms, often cleaned rooms herself,
“just to help the staff keep up.” Ellen, the desk manager, provided significant
discounts to guests who paid with cash. She kept the cash and did not register
the guest in the hotel’s computerized system. Instead, she took the room out
of circulation “due to routine maintenance.” Because the room did not show
up as being used, it did not receive a normal housekeeping assignment.
Instead, Josephine, the head of housekeeping, cleaned the rooms during the
guests’ stay.

Total take: $95,000
The Missing Control

Human resource controls. Ellen, the desk manager, had been fired by a
previous employer after being accused of fraud. If the Excelsior Inn had
conducted a thorough background check, it would not have hired her. The
hotel fraud was detected when Ellen missed work for a few days due to
illness. A system of mandatory vacations and rotating days off would have
increased the chances of detecting the fraud before it became so large.

Limitations of Internal Control
• Costs should not exceed benefit
• Human element
• Size of the business
Helpful Hint
Controls may vary with the risk level of the activity. For example,
management may consider cash to be high risk and maintaining
inventories in the stockroom as low risk. Thus, management would have
stricter controls for cash.

DO IT! 1 Control Activities
Identify which control activity is violated and explain how the
situation creates an opportunity for a fraud.
1. The person with primary responsibility for reconciling the bank
account and making all bank deposits is also the company’s
accountant.
Solution
Violates the control activity of segregation of duties
Recordkeeping should be separate from physical custody
Employee could embezzle cash and make journal entries to hide
the theft

Identify which control activity is and explain how the situation
creates an opportunity for a fraud.
2. Wellstone Company’s treasurer received an award for
distinguished service because he had not taken a vacation in 30
years.
Solution
Violates the control activity of human resource controls
Key employees must take vacations
Treasurer, who manages the company’s cash, might embezzle
cash and use his position to conceal the theft

Identify which control activity is violated and explain how the
situation creates an opportunity for a fraud.
3. In order to save money spent on order slips and to reduce time
spent keeping track of order slips, a local bar/restaurant does not
buy prenumbered order slips.
Solution
Violates the control activity of documentation procedures
If prenumbered documents are not used, then it is virtually
impossible to account for the documents
An employee could write up a dinner sale, receive cash from the
customer, and then throw away the order slip and keep the cash.

Cash Controls
Cash Receipts Controls
• Establishment of Responsibility:
 Only designated personnel are authorized to handle
cash receipts
• Segregation of Duties: Different individuals
 Receive cash
 Record cash receipts
 Hold cash

Cash Controls
• Documentation Procedures: Use
 Remittance advice (mail receipts)
 Cash register tapes or computer records
 Deposit slips
• Physical Controls
 Store cash in safes and bank vaults
 Limit access to storage areas
 Use cash registers or point-of-sale terminals
Cash Controls
• Independent Internal Verification
 Supervisors count cash receipts daily
 Assistant treasurer compares total receipts to
bank deposits daily
• Human Resource Controls
 Bond personnel who handle cash
 Require employees to take vacations
 Conduct background checks

Over-the-Counter Receipts ILLUSTRATION 8.5
Control of over-the-counter
receipts
Clerk Supervisor
Enters sales, Removes locked
counts cash cash register tape
Sends cash and Sends cash register tape

count to cashier to accounting dept.
Cashier Sends deposit Accounting Department

Counts cash, slip copy to Agrees register tape to
prepares deposit slips accounting dept. deposit slip and
records journal entry
Delivers cash and Bank

deposit slip to bank

Mail Receipts
• Mail receipts should be opened by two clerks, a list
prepared, each check endorsed “For Deposit Only”
• Each clerk signs the list to establish responsibility
• Original copy of list, along with checks, is sent to
cashier’s department
• Copy of list is sent to accounting department for
recording. Clerks also keep a copy.

Permitting only designated personnel to handle cash
receipts is an application of the principle of:
a. segregation of duties
b. establishment of responsibility
c. independent internal verification
d. human resource controls

Cash Disbursement Controls
Generally, internal control over cash disbursements is
more effective when companies pay by check or
electronic funds transfer (EFT) rather than by cash.
One exception is payments for incidental amounts that
are paid out of petty cash.

Cash Controls
Cash Disbursements Controls
• Establishment of Responsibility
 Only designated personnel are authorized to sign
checks (treasurer) and approve vendors
• Segregation of Duties
 Different individuals approve and make payments
 Check-signers do not record disbursements

Cash Controls
• Documentation Procedures
 Use prenumbered checks and account for
sequence
 Each check must have an approved invoice
 Require employees to use corporate credit cards
for reimbursable expenses
 Stamp invoices “paid”

Cash Controls
• Physical Controls
 Store blank checks in safes, with limited access
 Print check amounts by machine in indelible ink
• Independent Internal Verification

 Compare checks to invoices
 Reconcile bank statement monthly

Cash Controls
• Human Resource Controls:
 Bond personnel who handle cash
 Require employees to take vacations
 Conduct background checks

The use of prenumbered checks in disbursing cash is an
application of the principle of:
a. establishment of responsibility
b. segregation of duties
c. physical controls
d. documentation procedures

Cash Disbursement Controls
Voucher System Controls
• A network of approvals by authorized individuals,
acting independently, to ensure all disbursements by
check are proper
• A voucher is an authorization form prepared for each
expenditure in a voucher system

Petty Cash Fund
Petty Cash Fund - Used to pay small amounts.
Involves:
1. establishing the fund
2. making payments from the fund
3. replenishing the fund

Petty Cash Fund
Establishing the Petty Cash Fund
Illustration: If Zhū Ltd. decides to establish a NT$3,000 fund
on March 1, the general journal entry is:
Mar. 1 Petty Cash 3000
Cash 3000

Petty Cash Fund
Replenishing the Petty Cash Fund
Illustration: On March 15 Zhū Ltd.’s petty cash custodian
requests a check for NT$2,610. The fund contains NT$390
cash and petty cash receipts for postage NT$1,320, freight-out
NT$1,140, and miscellaneous expenses NT$150. The journal
entry is:
Mar. 15 Postage Expense 1,320
Freight-Out 1,140
Miscellaneous Expense 150
Cash 2,610
Petty Cash Fund
Replenishing the Petty Cash Fund
Illustration: Assume in the preceding example that the custodian
had only NT$360 in cash in the fund plus the receipts as listed.
The request for reimbursement would therefore be for NT$2,640
and Zhū would make the following entry.
Mar. 15 Postage Expense 1,320
Freight-Out 1,140
Miscellaneous Expense 150
Cash Over and Short30
Cash 2,640
DO IT! 2b Petty Cash Fund
Bateer Company established a $50 petty cash fund on July 1. On
July 30, the fund had $12 cash remaining and petty cash receipts
for postage $14, office supplies $10, and delivery expense $15.
Prepare journal entries on July 1 and on July 30.
July 1 Petty Cash 50
Cash 50
July 30 Postage Expense 14
Supplies 10
Delivery Expense 15
Cash Over and Short 1
Cash 38
Control Features of a Bank Account
The use of a bank contributes significantly to good
internal control over cash.
• Minimizes the amount of currency on hand
• Creates a double record of bank transactions
• Bank reconciliation

Making Bank Deposits
Authorized
employee should
make deposit.
LO 3 ILLUSTRATION 8.8 Copyright ©2019 John Wiley & Son, Inc. 47

Writing Checks
Written order signed by depositor directing bank to pay a
specified sum of money to a designated recipient.
Maker
Payee
Payer
ILLUSTRATION 8.9
Check with remittance advice

Electronic Funds Transfer (EFT) System
• Disbursement systems that use wire, telephone, or
computers to transfer cash from one location to
another
• Use is quite common
• EFT transactions normally result in better internal
control since no cash or checks are handled by
company employees

Bank Statements
• Prepared from bank’s perspective
• Every deposit bank receives is an increase in bank’s
liabilities (an account payable to the depositor)
• Lists in numerical sequence all paid checks along with
date check was paid and its amount
• Bank includes with bank statement memoranda
explaining other debits and credits it made to
depositor’s account
• A check that is not paid by a bank because of
insufficient funds in a bank account is called an NSF
check (not sufficient funds)
Bank
Statements
ILLUSTRATION 8.10
Bank statement

The control features of a bank account do not include:
a. having bank auditors verify the correctness of the
bank balance per books
b. minimizing the amount of cash that must be kept
on hand
c. providing a double record of all bank transactions
d. safeguarding cash by using a bank as a
depository

Reconciling the Bank Account
Reconcile balance per books and balance per bank
to their “correct” or “true” balance.
Reconciling Items:
1. Deposits in transit
2. Outstanding checks Time Lags
3. Bank memorandum
4. Errors

Reconciliation Procedure
Cash Balance Per Bank Cash Balance Per Books
+ Deposits in transit + EFT collections and
- Outstanding checks other deposits
+/- Bank errors - NSF (bounced)
checks
- Service charges and
other Payments
+/- Company errors
Corrected Balance Corrected Balance

Bank Reconciliation Illustrated
Illustration 8.10 presented the bank statement for Cray Gourmet which
the company accessed online. It shows a balance per bank of
€15,907.45 on April 30, 2020. On this date the balance of cash per
books is €11,709.45. From the foregoing steps, Cray determines the
following reconciling items for the bank.
Step 1. Deposits in transit (+): April 30 deposit
(received by bank on May 1). €2,201.40
Step 2. Outstanding checks (−): No. 453, €3,000.00;
No. 457, €1,401.30; No. 460, €1,502.70. 5,904.00
Step 3. Bank errors (+/−): None.
Reconciling items per books are as follows:

Reconciling items per books are as follows:
Step 1. Other deposits (+): Unrecorded electronic
receipt from customer on account on April 9
determined from the bank statement. €1,035.00
Step 2. Other payments (−): The electronic payments
on April 3 and 7 were previously recorded by the
company when they were initiated. Unrecorded charges
determined from the bank statement are as follows:
Returned NSF check on April 29 425.60
Debit and credit card fees on April 30 120.00
Bank service charges on April 30 30.00
Step 3. Company errors (+): Check No. 443 was correctly
written by Cray for €1,226 and was correctly paid by the
bank on April 12. However, it was recorded as €1,262 on
Cray’s books. 36.00
Bank Reconciliation
April 30, 2020
Cash balance per bank statement €15,907.45
Add: Deposits in transit 2,201.40
Less: Outstanding checks
No. 453 €3,000.00
No. 457 1,401.30
No. 460 1,502.70 5,904.00
Adjusted cash balance per bank €12,204.85
Cash balance per books €11,709.45

Add: Electronic funds transfer received 1,035.00
Error in recording check No. 443 36.00 1,071.00
Less: NSF check 425.60
Debit and credit card fees 120.00
Bank service charge 30.00 575.60
Adjusted cash balance per books €12,204.85

Entries for Bank Reconciliation
Collection of Electronic Funds Transfer: A payment of an
account by a customer is recorded in the same way, whether
the cash is received through the mail or electronically. The
entry is as follows.
Apr. 30 Cash 1,035.00
Accounts Receivable 1,035.00

Book Error: The cash disbursements journal shows that check
no. 443 was a payment on account to Roux Foods, a supplier.
The correcting entry is:
Apr. 30 Cash 36.00
Accounts Payable 36.00
NSF Check: As indicated earlier, an NSF check becomes an

account receivable to the depositor. The entry is:
Apr. 30 Accounts Receivable425.60
Cash 425.60

Bank Charge Expense: Fees for processing debit and credit
card transactions (€120) and the bank service charges (€30)
have been combined in a single entry as follows:
Apr. 30 Bank Charge Expense 150.00
Cash 150.00
Cash
Apr. 30 Balance 11,709.45 Apr. 30 425.60
30 1,035.00 30 150.00
30 36.00
Apr. 30 Balance 12,204.85
ILLUSTRATION 8.13
Adjusted balance in cash account

The reconciling item in a bank reconciliation that will
result in an adjusting entry by the depositor is:
a. outstanding checks
b. a bank error
c. deposit in transit
d. bank service charges

DO IT! 3 Bank Reconciliation
Deepika Kann owns Deepika Fine Fabrics. Deepika asks you to
explain how she should treat the following reconciling items when
reconciling the company’s bank account: (1) a debit memorandum
for an NSF check, (2) a credit memorandum for an electronic funds
transfer from one of the company’s customers received by the
bank, (3) outstanding checks, and (4) a deposit in transit.
Deepika should treat the reconciling items as follows.
1. Deduct from balance per books
2. Add to balance per books
3. Deduct from balance per bank
4. Add to balance per bank

Reporting Cash
Cash Equivalents
Cash equivalents are short-term, highly liquid
investments that are both:
1. Readily convertible to known amounts of cash, and
2. So near their maturity that their market value is
relatively insensitive to changes in interest rates
Restricted Cash
Cash that is not available for general use but rather is
restricted for a special purpose.
Reporting Cash ILLUSTRATION 8.14
Statement of fi nancial position
presentation of cash
Korean Air Lines, Inc.

Statement of Financial Position
(partial, in millions)
Assets
Current assets
Short-term investments ₩111,988

967,481

Reporting Cash
Which of the following statements correctly describes
the reporting of cash?
a. Cash cannot be combined with cash equivalents.
b. Restricted cash funds may be combined with
cash.
c. Cash is listed first in the current assets section.
d. Restricted cash funds cannot be reported as a
current asset.

DO IT! 4 Reporting Cash
Indicate whether each of the following statements is true or false.
1. Cash and cash equivalents are comprised of coins, currency (paper
money), money orders, and NSF checks.
2. Restricted cash is classified as either a current asset or non-current
asset, depending on the circumstances.
3. A company may have a negative balance in its bank account. In this
case, it should off set this negative balance against cash and cash
equivalents on the financial position.
4. Because cash and cash equivalents often includes short-term
investments, accounts receivable should be reported as the last item
on the financial position.
1. False 2. True 3. False 4. False

A Look at U.S. GAAP
Key Points
Similarities
The fraud triangle discussed in this chapter is applicable to all
international companies. Some of the major frauds on a U.S. basis
are Enron (USA), WorldCom (USA), and more recently the Bernie
Madoff Ponzi scheme.

A Look at U.S. GAAP
Key Points
Similarities
Accounting scandals both in the United States and internationally have
re-ignited the debate over the relative merits of GAAP, which takes a
“rules-based” approach to accounting, versus IFRS, which takes a
“principles-based” approach. The FASB announced that it intends to
introduce more principles-based standards.
Internal controls are a system of checks and balances designed to
prevent and detect fraud and errors. While most companies have
these systems in place, many have never completely documented
them, nor had an independent auditor attest to their effectiveness.

A Look at U.S. GAAP
Key Points
Similarities
Companies find that internal control review is a costly process but badly
needed. One study estimates the cost of SOX compliance for U.S.
companies at over $35 billion, with audit fees doubling in the first
year of compliance. At the same time, examination of internal
controls indicates lingering problems in the way companies operate.

A Look at U.S. GAAP
Key Points
Similarities
The accounting and internal control procedures related to cash are
essentially the same under both GAAP and this textbook. In addition,
the definition used for cash equivalents is the same.
Most companies report cash and cash equivalents together under
GAAP, as shown in this textbook. In addition, GAAP follows the same
accounting policies related to the reporting of restricted cash.

A Look at U.S. GAAP
Key Points
Differences
The SOX internal control standards apply only to companies listed on
U.S. exchanges. There is continuing debate over whether foreign
issuers should have to comply with this extra layer of regulation.

A Look at U.S. GAAP
Looking to the Future
Ethics has become a very important aspect of reporting. Different cultures
have different perspectives on bribery and other questionable activities,
and consequently penalties for engaging in such activities vary
considerably across countries. High-quality international accounting
requires both high-quality accounting standards and high-quality
auditing. Similar to the convergence of GAAP and IFRS, there is
movement to improve international auditing standards. The International
Auditing and Assurance Standards Board (IAASB) functions as an
independent standard-setting body. It works to establish high-quality
auditing and assurance and quality-control standards throughout the
world. Whether the IAASB adopts internal control provisions similar to
those in SOX remains to be seen. You can follow developments in the
international audit arena at the IAASB website.

Copyright
Copyright © 2019 John Wiley & Sons, Inc.
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responsibility for errors, omissions, or damages, caused by the use of these programs or
from the use of the information contained herein.
Copyright ©2019 John Wiley & Son, Inc. 73

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Accounting Principles

Copyright ©2019 John Wiley & Son, Inc. 3

Financial Pressure Rationalization

LO 1 Copyright ©2019 John Wiley & Son, Inc. 5

LO 1 Copyright ©2019 John Wiley & Son, Inc. 6

LO 1 Copyright ©2019 John Wiley & Son, Inc. 7

LO 1 Copyright ©2019 John Wiley & Son, Inc. 8

Maureen Frugali was a training supervisor for claims processing at Colossal

Total take: $11 million

The Missing Control

LO 1 Copyright ©2019 John Wiley & Son, Inc. 9

LO 1 Copyright ©2019 John Wiley & Son, Inc. 10

Lawrence Fairbanks, the assistant vice-chancellor of communications at

Total take: $475,000

The Missing Control

LO 1 Copyright ©2019 John Wiley & Son, Inc. 11

Total take: ¥3,100,000

The Missing Control

LO 1 Copyright ©2019 John Wiley & Son, Inc. 12

LO 1 Copyright ©2019 John Wiley & Son, Inc. 13

The Missing Control

LO 1 Copyright ©2019 John Wiley & Son, Inc. 15

At Centerstone Health, a large insurance company, the mailroom each day

LO 1 Copyright ©2019 John Wiley & Son, Inc. 16

The Missing Control

LO 1 Copyright ©2019 John Wiley & Son, Inc. 17

LO 1 Copyright ©2019 John Wiley & Son, Inc. 18

LO 1 Copyright ©2019 John Wiley & Son, Inc. 19

The Missing Control

LO 1 Copyright ©2019 John Wiley & Son, Inc. 20

LO 1 Copyright ©2019 John Wiley & Son, Inc. 21

LO 1 Copyright ©2019 John Wiley & Son, Inc. 22

The Missing Control

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Sends cash and Sends cash register tape

Cashier Sends deposit Accounting Department

Delivers cash and Bank

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• Independent Internal Verification

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