An auditor must have a general understanding of how employees could make errors or intentionally commit and conceal fraud. Otherwise, the auditor would be unable to recognize potential deficiencies in internal control and, more important, less likely to detect misstatements that are material to the financial statements. Consider the following cases:

Case A

Checks from customers are received by the company's receptionist, who stamps each check received with a restrictive endorsement, and prepares a list of all funds received and the name of each corresponding customer.

Case B

A company has three accounts payable clerks, each of whom prepares vouchers for payment. Supporting documents, such as receiving reports and bills of lading, are attached to each voucher as backup for the payment request. The vouchers and support are then forwarded to the company's controller for approval and check signing.

Case C

A company maintains a petty cash fund to pay for small, miscellaneous items such as office supplies or postage. The fund is maintained at $500. Whenever funds are disbursed, a signed request form is filed with the remaining cash. One office clerk is designated as the fund's custodian, who makes all withdrawals and reimbursements.

Required: 

Evaluate each of the three cases independently. For each case discuss:

1. How an employee could attempt concealment.

2. What control(s) should be present to prevent concealment.