Appliances Repair and Service Company bills all customers rather than collecting in cash when services are provided. All mail is opened by Tom Gyders, treasurer. Gyders, a CPA, is the most qualified person in the company who is in the office daily. Therefore, he can solve problems and respond to customers’ needs quickly. Upon receipt of cash, he immediately prepares a listing of the cash and a duplicate deposit slip. Cash is deposited daily. Gyders uses the listing to enter the financial transactions in the computerized accounting records. He also contacts customers about uncollected accounts receivable. Because he is so knowledgeable about the business and each customer, he grants credit, authorizes all sales allowances, and charges off uncollectible accounts. The owner is extremely pleased with the efficiency of the company. He can run the business without spending much time there because of Gyders’ effectiveness.
Imagine the owner’s surprise when he discovers that Gyders has committed a major theft of the company’s cash receipts. He did so by not recording sales, recording improper credits to recorded accounts receivable, and overstating receivables.
What weaknesses in the company’s processes might have permitted the fraud?
What suggestions do you have for changing the process to reduce the future potential for fraud?
Weakness in the process in the company might be on over relient on Gyder and he was the sole one to record the transaction with out having recheck or compliance from any other person.Has there any checks and balance by the company such fraud won’t happened.So the issue is on compliance.There could have anyother position to cross-check the all the transaction recorded by Gyder.
In future all transaction can be verified by any superior authority or the owner himself by randomly checking the records and cross verification by asking customer about the credit.