Background: As a district sales representative for a medical supplies vendor, "Mark Price" sold medical supplies directly to doctors at local hospitals.

1. Identify the internal control(s) involved for each activity.

2. Describe the internal control you would implement to prevent the fraudulent activity from occurring in the future.

Mark's Activities

a. Mark had a falling-out with his employer and was fired.

Internal Control:

Description of new control:

b. Mark continued to work with his district hospitals as if he were still a representative of the vendor, while his former employer searched for a new sales rep. Mark hand-delivered false invoices printed on stationery he had kept after his termination.

Internal Control:

Description of new control:

c. One hospital refused to pay the false invoices because receipt of the invoiced items could not be verified.

What voucher system document controls were in place at this hospital?

d. Another hospital paid the false invoices, giving the checks directly to Mark when he met them at his usual time, rather than mailing the checks to the supplier.

Internal Control:

Description of new control:

e. Mark endorsed the hospital checks with the name of his former company's cashier and used a "For deposit only" stamp purchased at a local office supply store to stamp each check. He deposited the checks into his personal bank account.

Internal Control:

Description of new control: