2. Ben Geronimo Company (BGC) is a small manufacturer of high-quality graphite fly-fishing rods. It sells its products to fly-fishing shops throughout the Philippines and Singapore. BGC began as a small company with four (4) salespeople, who are family members of the owner. Due to the high popularity and recent growth in fly-fishing, BGC now employs a sales force of 16, and for the first time, employs non-family members. The salespeople travel around the country, giving fly casting demos of their new models. Once the sales orders are generated, inventory availability is determined, and, if necessary, the salesperson sends the order directly to the manufacturing department for immediate production. Sales staff compensation is tied directly to their sales figures. BGC's financial statements for the December year-end reflect unprecedented sales, 35% higher than last year. Further, sales for December account for 40% of all sales. Last year, December sales accounted for only 20% of all sales.

Required: In no more than five (5) sentences, assess any potential internal control issues and exposures in the problem and discuss some preventive measures BGC may wish to implement.

3. A purchasing agent for a home improvement center is also part owner of a wholesale lumber company. The agent has sole discretion in selecting vendors for the lumber sold through the center. The agent directs a disproportionate number of purchase orders to his company, which charges above-market prices for its products. The agent's financial interest in the supplier is unknown to his employer.

Required: Identify the type of fraud being depicted and discuss the controls that can be implemented to prevent or detect it.