E5-32B. (Learning Objectives 1, 2: Learning about fraud; identifying internal control weaknesses)

Identify the internal control weakness in the following situations. State how the person can hurt the company.

a. Josh Michaels works as a security guard at CITY parking in Cologne, Germany.

Michaels has a master key to the cash box where customers pay for parking. Each night Michaels prepares the cash report that shows

(a) the number of cars that parked on the lot and

(b) the day’s cash receipts. Lily Cooper, the CITY treasurer, checks Michaels’s figures by multiplying the number of cars by the parking fee per car. Cooper then deposits the cash in the bank.

b. Ara Ahern is the purchasing agent for Superior Golf Equipment. Ahern prepares purchase orders based on requests from division managers of the company. Ahern faxes the purchase order to suppliers who then ship the goods to Superior. Ahern receives each incoming shipment and checks it for agreement with the purchase order and the related invoice.

She then routes the goods to the respective division managers and sends the receiving report and the invoice to the accounting department for payment.