Fraud Opportunities. Simon Blank Construction Company has two divisions. The president (Chris Simon) manages the roofing division. Simon delegated authority and responsibility for management of the modular manufacturing division to John Gault. The companyhas a competent accounting staff and a full-time internal auditor. Unlike Simon’s procedures, however, Gault and his secretary handle all bids for manufacturing jobs, purchaseall materials without competitive bids, control the physical inventory of materials, contractfor shipping by truck, supervise the construction activity, bill the customer when the job isfinished, approve all bid changes, and collect the payment from the customer. With Simon’stacit approval, Gault has asked the internal auditor not to interfere with his busy schedule.Required:Discuss this situation in terms of internal control and identify frauds that could occur
Fraud Opportunities. Simon Blank Construction Company has two divisions. The president (Chris Simon) manages the roofing division. Simon delegated authority and responsibility for management of the modular manufacturing division to John Gault. The company
has a competent accounting staff and a full-time internal auditor. Unlike Simon’s procedures, however, Gault and his secretary handle all bids for manufacturing jobs, purchase
all materials without competitive bids, control the physical inventory of materials, contract
for shipping by truck, supervise the construction activity, bill the customer when the job is
finished, approve all bid changes, and collect the payment from the customer. With Simon’s
tacit approval, Gault has asked the internal auditor not to interfere with his busy schedule.
Required:
Discuss this situation in terms of internal control and identify frauds that could occur
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