The paper "The Study of Fraud Risk" is a wonderful example of an assignment on finance and accounting. The matter here is the breach of the bank loan covenant by Hotline since the key performance indicators will be at risk. Fraud risk The fraud risk is the risk of some individuals within the company who intend to misappropriate the refinancing for the company for their personal. Explanation The fraud risk is the breach of the bank loan covenant that is intended to fund the company operation. The fraud is being perpetrated by some individuals to benefit themselves from the refining intended for the company. Matter 2 There is weak internal control over cash since Jamie ports are authorized to approve and pay involves which depicts some fraud risk within the cash department. Fraud risk There is a risk of cash embezzlement by the cash department due to weak internal control over cash. Explanation Jamie port is given an authority to approve and pay invoices which is extremely risky within the cash department since Jamie will try to manipulate the books of account by paying for fictitious invoices that were never raised.
In this regard, the internal control over cash needs to improve in order to ensure that there is a different person who pays for the invoice and another to approve the involves raised. Matter 3 The matter is the change of supplier. It is apparent that the intent of changing the supplier is not to save on cost but to provide a friend (lily Spear) an opportunity to supply the product. Fraud risk The fraud risk is the possibility of misappropriation of the company’ s cash by allocating the tender to supply goods by your friend would amount to risk since; the two will collude to defraud the company Explanation The supplier of the product is a friend who will collude with the hotline staff to supply the low-quality products at an expensive price in order to corrode the company financially.
The possibility of fraud between the supplier and the hotline staff evident since, since the change of supplier, there has been an increase the rate of the defect as depicted by the rate of return outward which is a strong indication that the supplier is providing the low-quality product at the cost of the company (Singleton, 2006). Matter 4 The matter here is that Logan has asked for the manufacturing costs incurred by his wife to be written off as a bad debt which is a fraud to the company. Fraud risk The audit risk is that the manufacturing cost incurred by Logan’ s wife is intended to be set-off as bad debt to the company. Explanation Setting off the wife’ s manufacturing cost as a bad debt of the company is a fraud since; Logan and his wife are using the company to perpetuate the company cash.
The cost incurred in manufacturing must be accounted for and consequently, the expense incurred by Logan's wife shall not be incurred by the company since a company is a legal entity distinct from its shareholders. Matter 5 Angela Spear who is in charge of purchase as entered into a contract with the GF to pay for goods on delivery from the normal 45 creditor’ s period. The renegotiation is made without the consent of another purchasing department.
Lonsdale, J. (2011) Performance Auditing: Contributing to Accountability .
Loughran, M. (2010) Auditing For Dummies.
Moeller, R.R. (2009) Brink's Modern Internal Auditing: A Common Body of Knowledge.
Singleton, T. (2006) Fraud Auditing and Forensic Accounting.