Based on the information above, discuss the ways in which fraud/ theft could be perpetrated at Shine (Pty) Ltd.

QUESTION                                                                                                                            

The acquisition and payments cycle provides plenty of opportunity for employees and management to misappropriate company assets. In addition to controlling the acquisition of goods, the cycle is designed to control the outflow of funds from the business, so any major breaches of control can have serious consequences. The following information relates to Shine (Pty) Ltd, a wholesaler of light fittings and other electrical equipment.

1. The two buying officers negotiate prices with suppliers and place They also follow up on orders to ensure that they are received.
2. When a new supplier is taken on, the buyer sends an internal memo to the creditors administration clerk requesting that the supplier is entered onto the creditors Masterfile. The buyer must notify the administration clerk of the new supplier’s full details including the creditor’s bank details.
3. When a delivery from a supplier is received, one of the warehouse clerks receives the goods at the warehouse receiving/ dispatch point (a large steel roller door), by signing the supplier delivery note and retaining a copy which is filed in the warehouse administration office. The goods are then packed onto the shelves in the warehouse by the warehouse pickers, each
4. Creditors are paid by electronic funds Five employees in the accounting department

have access to the company’s bank account from their terminals. To effect EFT payment, one of the five employees must enter his or her password to authorize the transfer and a second employee (of the five) must enter his of her password to release the payment. Each of the five is issued with their own unique dongle which must be inserted into the computer when the passwords are entered. Obviously, authorization must take place before release, but any two of the five employees can effect an EFT.

1. On the 25th of each month the creditors administration clerk, having reconciled the creditor’s statement and the creditor’s account in the creditors’ master file, prepares on the system, a file of creditors to be paid that month by EFT and forwards it to any one of the five accounting personnel responsible for effecting EFT payments. The creditors administration clerk plays no part in effecting EFT payments and once he has transferred the file of payments to be made, it cannot be amended in any way by the authorizing or releasing personnel. On receipt of the file the authorising employee reviews the file for anything “out of the ordinary” and checks that the creditor is listed on the Masterfile, before requesting any one the other four personnel to release the file to the bank for payment.
2. Inventory counts are conducted under the supervision of the chief store man, Charlie Sheen, every three months. At the end of the count, he adjusts the inventory records to ensure that the quantities reflected, agree with the physical quantities reflected, agree with the physical quantities recorded at the count.

REQUIRED