Business decision case A During a national emergency, a managerial accountant was called back to active duty with the US Army. An acquaintance of the accountant forged papers and assumed the identity of the accountant. He obtained a position in a small company as the only accountant. Eventually he took over from the manager the functions of approving bills for payment, preparing and signing checks, and almost all other financial duties. On one weekend, he traveled to some neighboring cities and mailed invoices made out to the company for which he worked. On Monday morning, he returned to work and began receiving, approving, and paying the invoices he had prepared. The following weekend he returned to the neighboring cities and cashed and deposited the checks in bank accounts under his own name. After continuing this practice for several months, he withdrew all of the funds and never was heard from again.

For each item in the preceding list, describe in writing at least one feature of good internal control that would have prevented the losses due to dishonesty.

Pocketed cash receipts from sales and understated the cash register readings at the end of the day or altered the copies of the sales tickets retained.

Stolen checks mailed to the company in payment of accounts receivable, credited the proper accounts, and then debited fictitious receivables to keep the records in balance.

Issued checks to fictitious suppliers and deposited them in accounts bearing these names with himself as signer of checks drawn on these accounts; the books were kept in balance by debiting the Purchases account.

Stolen petty cash funds by drawing false vouchers purporting to cover a variety of expenses incurred.

Prepared false sales returns vouchers indicating the return of cash sales to cover further thefts of cash receipts.