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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
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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range of outside correspondence to various internal office mail, as well as receiving and distributing a wide departments. One of Sethi's jobs was to open cash receipts envelopes from customers making payments 3. MAIL ROOM FRAUD AND INTERNAL CONTROL Sarat Sethi, 'a professional criminal, took a job as a mail room clerk at Benson & Abernathy and Company, a large department store. The mail room extremely hectic work environment consisting of a supervisor and 45 clerks. The clerks were responsible for handling promotional mailings, catalogs, and inter- office mail, as well as receiving and distributing a wide was an E ta ac a.
Transcribed Image Text:range of outside correspondence to various internal office mail, as well as receiving and distributing a wide departments. One of Sethi's jobs was to open cash receipts envelopes from customers making payments 3. MAIL ROOM FRAUD AND INTERNAL CONTROL Sarat Sethi, 'a professional criminal, took a job as a mail room clerk at Benson & Abernathy and Company, a large department store. The mail room extremely hectic work environment consisting of a supervisor and 45 clerks. The clerks were responsible for handling promotional mailings, catalogs, and inter- office mail, as well as receiving and distributing a wide was an E ta ac a.
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 reflect the payment. He sent the checks to the cash receipts department, where they were recorded in the cash jour- nal and then deposited in the bank. Batch totals of cash received and accounts receivable updated were recon- ciled each night to ensure that everything was accounted for. Nevertheless, over a one-month period, Sethi man- aged to steal $100,000 in customer payments and then left the state without warning. b0 The fraud occurred as follows: Because the name of the company was rather long, some people had adopted the habit of making out checks simply to. Benson. Sethi had a false identification prepared in the name of John Benson. Whenever he came across a check made out to Benson, he would steal it along with the remit- tance advice. Sometimes people would even leave the payee section on the check blank. He also stole these a a checks. He would then modify the checks to make them payable to J. Benson and cash them. Because the ts AR department received no remittance advice, the end- of-day reconciliation with cash received disclosed no discrepancies. er Required pe 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? ail a
Transcribed Image Text: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 reflect the payment. He sent the checks to the cash receipts department, where they were recorded in the cash jour- nal and then deposited in the bank. Batch totals of cash received and accounts receivable updated were recon- ciled each night to ensure that everything was accounted for. Nevertheless, over a one-month period, Sethi man- aged to steal $100,000 in customer payments and then left the state without warning. b0 The fraud occurred as follows: Because the name of the company was rather long, some people had adopted the habit of making out checks simply to. Benson. Sethi had a false identification prepared in the name of John Benson. Whenever he came across a check made out to Benson, he would steal it along with the remit- tance advice. Sometimes people would even leave the payee section on the check blank. He also stole these a a checks. He would then modify the checks to make them payable to J. Benson and cash them. Because the ts AR department received no remittance advice, the end- of-day reconciliation with cash received disclosed no discrepancies. er Required pe 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? ail a
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