Project Ohwereamess Corporation is a family-owned business that designs and produces commercial graphics for window displays, banners, signs, and similar applications. The company is currently run by J.D. Armstrong (President and CEO), who is the son of the company's founder, Jackson Armstrong. J.D. took over in 2010. Jackson is still Chairman of the Board of Directors. Other Board members include J.D. as well as his uncle (Robert Armstrong, who used to work for the company), his cousin AnnaBeth Cinater (Robert's daughter), along with two non-family members (Xin Yang and Jess Planth) who are old family friends. The Board is not very active and has advised only on minor operation-related issues in the past. The business has an office manager, Henry Majistic, who has been with the company since 2006, and a bookkeeper, Sasha Sorens, who has been with the company since 2014. Information about Henry's and Sasha's roles (as relate to accounting) can be found in the Accounting Policies and Procedures Manual (Appendix A). Henry was given the position of office manager after working as a designer for 3 years. Sasha took a bookkeeping class at the community college before becoming the bookkeeper. J.D. relies on Henry and Sasha for the day-to-day operations and oversight of the team of designers and installers. J.D.'s primary focus and goal is to continuously grow the company's client list and increase profits. Jackson established the company with this mindset and J.D. has not wavered from this path. However, last week, J.D. received a call from the bank because the company's checking account has been overdrawn by significant amounts several times in the past couple of months. The bank expressed concern that there may be fraudulent activities within Ohwereamess. J.D. reached out to the Board to ask advice on how to handle the situation and the Board decided to start with an evaluation of the organization. Your general task is to assess Ohwereamess Corporation's existing structure and make recommendations. The specific expectations are outlined below. ANALYSIS REQUIREMENTS 1. Fraud Risk Assessment ( 30 points) Identify Ohwereamess's fraud risks using the 17 principles in COSO's Internal Control Framework (pages 6-7 of COSO reading). See Appendix B for format guide. The first principle under Control Environment is started as an example. The guide also contains a place for you to identify any risks you feel do not align with the 17 principles, but are risks. (I do not want you to exclude or overlook a risk simply because you cannot fit it into a "bucket" that is given.) In conducting this assessment, consider course modules relating to fraud risks to help analyze: - Modules 1 and 2-fraud risk factors - Modules 1 and 3-common occupational fraud schemes (specifically consider billing schemes discussed in Module 3 , though you should consider other occupational fraud schemes as well) - Module 4-Think Like a Fraudster! 2. Internal Control Assessment (15 points) Provide a detailed listing of existing controls (already in place) at Ohwereamess with a brief explanation of what fraudulent activity the control should deter or prevent. The controls may or may not be working effectively. (This can be a bulleted list, but you should use complete sentences in your writing.) 3. Internal Control Recommendations (30 points) Provide detailed internal control recommendations to address the risks you identify in your fraud risk assessment in requirement 1 . See Appendix C for format guide. Prepare a typewritten report to address the analysis requirements. You should prepare this assignment from the perspective that the resulting report will go to Ohwereamess's Board of Directors. Your report should exhibit professional language, grammar, and organization. Responses should reflect application of critical thinking and logical analyses. Properly cite and provide a reference list for any outside sources, if appropriate (reference list does not count toward page count). I. Introduction This manual describes accounting policies and procedures of Ohwereamess Corporation. The purpose is to ensure financial statements conform to generally accepted accounting principles, assets are safeguarded, and finances are managed with accuracy, efficiency, and transparency. All Ohwereamess Corporation's staff with a role in the management of fiscal and accounting operations are expected to comply with the policies and procedures in this manual. II. Division of Responsibilities The following is a list of personnel who have fiscal and accounting responsibilities: Chief Executive Officer 1. Reviews and approves year-end financial statements 2. Authorized signer on Ohwereamess Corporation's bank accounts 3. Reviews and approves all expenditures over $50,000 Office Manager 1. Authorized signer on Ohwereamess Corporation's bank accounts 2. Responsible for personnel files Bookkeeper 1. Receives and opens all incoming mail 2. Responsibility for data entry into accounting system 3. Maintains general ledger 4. Manages accounts receivable and payable 5. Processes invoices and prepares checks for signature 6. Mails vendor checks 7. Makes bank deposits 8. Processes payroll 9. Reconciles all bank accounts 10. Prepares year-end financial statements III. Cash Receipts The Bookkeeper receives and opens incoming mail. Checks are kept in the Bookkeeper's desk drawer until processing and deposit. Weekly, the Bookkeeper processes checks, prepares the deposit, and takes the deposit to the bank. A copy of the deposit slip is attached to the deposit documentation and put in a file to attach to the bank statement. Any cash received is kept in the Bookkeeper's desk drawer and deposited within 2 business days. IV. Cash Disbursements Cash disbursements are made for payments to employees for payroll and to vendors for goods and services, taxes/fees, staff training and development, memberships and subscriptions, employee reimbursements, and marketing/promotional materials. For payroll payments, completed timesheets are to be submitted to the Bookkeeper weekly on Fridays. The Bookkeeper will process payroll in a timely manner and record vacation time, holiday hours, sick time, and any other information deemed necessary to properly reflect time worked. For vendor payments, the Bookkeeper processes invoices received or other documentation. Checks are processed weekly. Checks can be prepared manually within one day, and the Bookkeeper may use a signature stamp if one of authorized signers is not available; but these exceptions should be limited to emergency situations. The Bookkeeper should reconcile all bank accounts on a monthly basis. The Office Manager reviews the completed bank reconciliations and assists the Bookkeeper with any anomalies. VI. Property and Equipment Property and equipment includes items such as office furniture and equipment, computer hardware, and computer software. Ohwereamess Corporation's policy is to capitalize all items that have a unit cost greater than one thousand dollars ($1,000). Items purchased at a cost less than one thousand dollars ($1,000) will be expensed in the period purchased. Depreciation is recorded annually, computed using the straight-line method over the depreciation period. The depreciation period for capitalized assets is as follows: VII. Personnel Records All personnel files contain the following documents: - Application and/or resume - Date of employment - Position and pay rate - Authorization of payroll deductions - W-4 withholding authorization - Termination data, where applicable - Emergency contact form - I-9 form VIII. Fiscal Year-End Close 1. Bookkeeper will review year-end journal entries and balance sheet accounts, including verification that cash accounts match bank reconciliations; fixed asset accounts reflect purchases and dispositions; accounts receivable and payable accounts match outstanding amounts due and owed, respectively; . 2. Bookkeeper will review year-end payroll reports, verifying that payroll expenses match federal and state payroll filings. 3. Bookkeeper will prepare year-end financial statements