ABC satellite, a satellite television company, sells satellite television service contracts to customers, usually for a 24-month period. ABC satellite is a fast-growing high-paced company created by aggressive salesmen. The companys success has made its owners very wealthy, many of them live a lavish life style and drive luxury cars to work. The retention division of this company is responsible for contacting customers nearing the end of his/her contract and convincing the customer to renew his/her contract. Retention agents are paid a commission for each account that agrees to a new contract. The commission rate is considered by many employees to be below the industry standard. Over the past year, the retention division has undergone significant supervisor and manager turnover. The current manager has not had sufficient time or understanding to properly implement controls. Additionally, the new manager has been so busy playing catch up that he has yet to hold a training or orientation meeting for his department. The current process for paying commissions to retention agents on renewed accounts is as follows:

• The phone system records the verbal contract extension commitment.
• The retention agent attaches the audio recording to the customers account in the ABC customer contract system (CCS); this acts as legal proof of contract.
• The retention agent then updates the customer contract date information in CCS.
• Each retention agent has a spreadsheet he or she uses to keep track of the account renewals for the month.
• The retention agent records the customer #, date of contract extension, and length of contract extension in his/her spreadsheet.
• At the end of each month the retention supervisor receives each agents spreadsheet and multiplies the total retention renewals submitted by the agent by his/her commission rate in order to calculate the total monthly commission.
• The spreadsheets are not maintained by the supervisors.
• In order to get the payments processed quickly, the supervisors have less than four hours to receive all agents spreadsheets (usually each supervisor is responsible for 20+ agents) and submit the summary file to payroll.
• The supervisor records the total commission earned by each agent on a summarized spreadsheet, which is sent directly to payroll for payment.

1. It appears there may be some issues at this company that may be causing a poor work environment. What are some factors in this case that may contribute to the poor work environment?

2. The retention department is one department that the auditor should focus on in this company. What are some things that the auditor should look for?

3. Choose two procedures out of the five primary control procedures and discuss why these two procedures would be the best ones to focus on to help reduce the likeliness of fraud in the retention department.