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Accounting 341 Assignment 1

2Assignment 1-6 Create a list of at least 10 suggested improvements for Mogel’s Inc. that would help prevent a similar skimming scheme from occurring. For each improvement, indicate why this will help prevent a skimming scheme similar to this from happening again at Mogel’s. (1) Stefan Winkler used a method of force balancing to try to cover up his scheme. When payments were received he posted payment to customer’s accounts but never deposited the money into Mogel’s account. This could have been avoided if Mogel’s had another employee reconcile its bank statements regularly and toughly. According to Wells, when an individual skims receivables but continues to post payments to customer accounts, postings to accounts receivable will exceed what is reflected in the daily deposit. (page 65). (2) Winkler also used the method of lapping to conceal his skimming as well. He would steal customer A’s payment then post customer B’s payment to A’s account and so forth . Mogel’s should have an employee spot check deposits to accounts receivable to make sure that payments are being applied to the correct accounts. Wells implies, If a check were received by Customer A but the payment posted to Customer B’s account, this would indicate a lapping scheme. (65). (3) Mogel’s could have noticed something was suspicious by how Winkler was such a “model” employee. In order to cover up his schemes, Winkler had to come to work everyday to make sure no one else was looking at his books. It’s sad to think that your model employee would be

2 Case Study: Cover Story: Internal Fraud In the Cover Story: Internal Fraud case study in the Principles of Fraud Examination textbook by Joseph T. Wells, Albert Miano conducted a billing scheme totaling more than a million dollars over a period of four years (Wells, 2011). He oversaw the painting operations for a magazine publisher which included a budget of “approximately $500,000 a year” (Wells, 2011). Mr. Miano was the “only person to oversee the painting operations in its facilities department” for the victim organization (Wells, 2011). Like many documented fraud cases, many organizations rely on the trust and responsibility of one employee and mistakenly give too much control or access to its employees. In this case, the magazine publisher did not adhere to internal controls and the separation of duties that may have prevented or detected the fraud much earlier before the loss became too substantial. Measures to Prevent and Detect Fraud “Prevention of non-accomplice vendor invoicing schemes is largely dependent on the purchasing function controls” of the organization (Wells, 2011). The magazine publisher could have had control measures set in place to prevent or detect the billing scheme conducted by Albert Miano. According to the textbook, there are “several red flags that are common to non-accomplice vendor invoicing” that can also assist organizations in the prevention and detection of fraud (Wells, 2011). First, “organizations should maintain up-to-date approved vendors. Deviations from this information, such as a change in mailing address or electronic payment information, should be

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