range of outside correspondence to various internaloffice mail, as well as receiving and distributing a widedepartments. One of Sethi's jobs was to open cashreceipts envelopes from customers making payments3. MAIL ROOM FRAUD ANDINTERNAL CONTROLSarat Sethi, 'a professional criminal, took a job as a mailroom clerk at Benson & Abernathy and Company, alarge department store. The mail roomextremely hectic work environment consisting of asupervisor and 45 clerks. The clerks were responsiblefor handling promotional mailings, catalogs, and inter-office mail, as well as receiving and distributing a widewasanEtaaca. on their credit card balances. He separated the remit-tance advices (the bills) and the checks into two piles.He then sent remittance advices to the AR department.where the customer accounts were updated to reflectthe payment. He sent the checks to the cash receiptsdepartment, where they were recorded in the cash jour-nal and then deposited in the bank. Batch totals of cashreceived and accounts receivable updated were recon-ciled each night to ensure that everything was accountedfor. Nevertheless, over a one-month period, Sethi man-aged to steal $100,000 in customer payments and thenleft the state without warning. b0The fraud occurred as follows: Because the name ofthe company was rather long, some people had adoptedthe habit of making out checks simply to. Benson.Sethi had a false identification prepared in the name ofJohn Benson. Whenever he came across a check madeout to Benson, he would steal it along with the remit-tance advice. Sometimes people would even leave thepayee section on the check blank. He also stole theseaachecks. He would then modify the checks to makethem payable to J. Benson and cash them. Because thetsAR department received no remittance advice, the end-of-day reconciliation with cash received disclosed nodiscrepancies.erRequiredpea. This seems like a foolproof scheme. Why didSethi limit himself to only one month's activitybefore leaving town?b. What controls could Benson & Abernathy imple-ment to prevent this from happening again?aila

Internal Control: Internal control refers to the policies, and plans of the business organization…

a. This seems like a foolproof scheme. Why did Sethi limit himself to only one month's activity before leaving town? b. What controls could Benson & Abernathy imple- ment to prevent this from happening again?

a. This seems like a foolproof scheme. Why did Sethi limit himself to only one month's activity before leaving town? b. What controls could Benson & Abernathy imple- ment to prevent this from happening again?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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