Practical Problem 2 You decide to conduct an audit of the purchasing function for this division. But before you do you decide to get some more information about the division and the employees. You find that Mr. Brackens has been an employee for more than twenty-five years, coming to the company right out of college. He has five employees that work for him, one is a manager (Angela Harkins and the rest are buyers --two senior buyers and three junior buyers. Harkins has been an employee for 15 years and the buyers have been working in the department for six months to ten years: Jim Rydel Sr. Buyer (10 years). Ruth Bell, Senior Buyer (7 years): Ben Troupe, Junior Buyer (2 years): Rhonda Davidson Junior Buyer (2 years), Rick Adams, Junior Buyer (6 months). Regarding purchasing policies, any purchase that is more than $10.000 must go out for a bid All bids must be approved by the manager of the purchasing department or higher. Only authorized vendors are allowed to bid. Vendors without a vendor number must be handled by special processing and approved by the director. Junior buyers can authorize purchases of up to $5,000, senior buyers, S7,000; managers and directors. $9,000. You pull a listing of vendors who have been paid more than $100,000 for the years, 2000 2001 and 2002 and find the following 2002 0 0.00% 8.84% JMC Vendors with >$100,000 2000-2002 2000 Black IPS 47 844 1209% Warehouse Eqpm 30.402 7 68% Lantern Co 38,089 9.62% Oak Hil Distnbutors 61,166 15.46% Seros 37 090 9.37% Randazzo Supply 41, 189 10.41% Adam Systems 50,470 12.75% AA Supply 67,194 16.98% 20 321 5.13% Top a 0 0.00% Blues Pro 0 0.00% 395,765 100.00% 2001 52 468 590% 44447 4.99 78 682 24566 276% 48 843 5.49% 62.012 6 97% 52 198 586% 80 378 9.03% 78,019 8.77% 105 620 1187 260 785 29 30% 890,019 100.00% 70 940 45,872 78.229 119.068 111,845 140,033 113 723 173.854 247.172 408,323 1,511,061 469% 3.04% 5.18% 788% 740% 927% 7535 1151% 16.36% 27.02% 100.00% Total 100,312 145,789 162.643 163,961 205.001 215,046 242,701 251 295 272,194 352,792 669,108 2,790,842 of Total 3.58% 522% 5.83% 5.87% 735% 7.71% 8.70% Ad Sys 9.36% 9.75% 12.64% 23.98% 100.00% Questions: 1. Is there anything that is suspicious on the summary? Explain your answer Practical Problem 2 2. Do you have predication for fraud? Why or why not? 3. Would you conduct a surprise audit of the area? Why or why not? 4. How would you approach the area? 5. What are your next steps? Practical Problem 2 You decide to conduct an audit of the purchasing function for this division. But before you do you decide to get some more information about the division and the employees. You find that Mr. Brackens has been an employee for more than twenty-five years, coming to the company right out of college. He has five employees that work for him, one is a manager (Angela Harkins and the rest are buyers --two senior buyers and three junior buyers. Harkins has been an employee for 15 years and the buyers have been working in the department for six months to ten years: Jim Rydel Sr. Buyer (10 years). Ruth Bell, Senior Buyer (7 years): Ben Troupe, Junior Buyer (2 years): Rhonda Davidson Junior Buyer (2 years), Rick Adams, Junior Buyer (6 months). Regarding purchasing policies, any purchase that is more than $10.000 must go out for a bid All bids must be approved by the manager of the purchasing department or higher. Only authorized vendors are allowed to bid. Vendors without a vendor number must be handled by special processing and approved by the director. Junior buyers can authorize purchases of up to $5,000, senior buyers, S7,000; managers and directors. $9,000. You pull a listing of vendors who have been paid more than $100,000 for the years, 2000 2001 and 2002 and find the following 2002 0 0.00% 8.84% JMC Vendors with >$100,000 2000-2002 2000 Black IPS 47 844 1209% Warehouse Eqpm 30.402 7 68% Lantern Co 38,089 9.62% Oak Hil Distnbutors 61,166 15.46% Seros 37 090 9.37% Randazzo Supply 41, 189 10.41% Adam Systems 50,470 12.75% AA Supply 67,194 16.98% 20 321 5.13% Top a 0 0.00% Blues Pro 0 0.00% 395,765 100.00% 2001 52 468 590% 44447 4.99 78 682 24566 276% 48 843 5.49% 62.012 6 97% 52 198 586% 80 378 9.03% 78,019 8.77% 105 620 1187 260 785 29 30% 890,019 100.00% 70 940 45,872 78.229 119.068 111,845 140,033 113 723 173.854 247.172 408,323 1,511,061 469% 3.04% 5.18% 788% 740% 927% 7535 1151% 16.36% 27.02% 100.00% Total 100,312 145,789 162.643 163,961 205.001 215,046 242,701 251 295 272,194 352,792 669,108 2,790,842 of Total 3.58% 522% 5.83% 5.87% 735% 7.71% 8.70% Ad Sys 9.36% 9.75% 12.64% 23.98% 100.00% Questions: 1. Is there anything that is suspicious on the summary? Explain your answer Practical Problem 2 2. Do you have predication for fraud? Why or why not? 3. Would you conduct a surprise audit of the area? Why or why not? 4. How would you approach the area? 5. What are your next steps