Rachell Pabiona BSA - 2

RACHELL PABIONA
BSA -2
1. The role of the internal control (as what can be seen in the figure) is to protect the firm's assets from
these bullets (undesirable events). However there are still bullets that can pass overthe planned internal
control. The holes in the control shield are what so called Exposures which increase the firm's risk to
financial loss or injury from undersirable events. Exposure is the weakness of a control. Undesirable
events are the bullets in the figure labeled as Access, Fraud, Errors and Mischief. An unauthorized acces
to the firm's assets (including information) can be seen as one of the bullet thrown. Another bullet
represent the fraud perpetrated by pesons both inside and outside the firm. Also the errors due to
employee incompetence, faulty computer programs, and and corrupted input data. Last bullet is the
harmful acts, such as unauthorized access by computer hackers and threats from computer viruses that
destroy programs and databases. The bullets passed from the internal control will bring different risks
such as the destruction of assets (both physical and information), theft of assets, corruption and
disruption of information system.
2.This is the Preventive, Detective, Detective Control Model. The figure shows the three levels of
control; preventive control, detective control, corrective control. The arrows shows how undesirable
events pass through the controls. The first level is the preventive control. Prevention is better than cure.
The majority of undesirable events can be blocked and reduces the frequency of its occurrence.
Preventing errors and fraud is far more cost-effective than detecting and correcting problems after they
occur. Example of which is the well-designed source document. When the risk pass over the preventive
control, the next thing to do is detecting. The detective controls are the devices techniques and
procedures designed to indentify and expose undersirable events.When a detective control identifies a
departure from standard, it sounds an alarm to attract attention to the problem. If the undesirable
events still able to dodge the detective controls, this will be the time to correct it in the corrective
control level. These are actions taken to reverse the effects of errors detected. In detective controls, it
identify anomalies and draw attention to them while in corrective control actually fix the problem.
3. Fraud refers to a deception that is intentional and caused by an employee or organization for personal
gain. In other words, fraud is a deceitful activity used to gain an advantage or generate an illegal profit.
In addition, the illegal act benefits the perpetrator and harms other parties involved. This figure is the
fraud triangle which consists of three factors that contribute to or are associated with management and
employee fraud. These are the Pressure, Opportunity, Ethics. The situational pressure includes personal
or job-related stresses that could coerce an individual to act dishonestly. The opportunity involves
direct access to assets and/or access to information that controls assets.Opportunity refers to
circumstances that allow fraud to occur. In the fraud triangle, it is the only component that a company
exercises complete control over. And the ethics, which pertains to one’s character and degree of moral
opposition to acts of dishonesty.The figure shows that the individual with a high level of personal ethics,
who is confronted by low pressure and limited opportunity to commit fraud, is more likely to behave
honestly than one with weaker personal ethics, who is under high pressure and exposed to greater fraud
opportunities. Obviously, matters of ethics and personal stress do not lend themselves to easy
observation and analysis.
II.
1. This situation is in violation because the sales manager has the power of credit authorization as well
as accounts receivable record keeping. A commission based on sales means they're paid purely based on
their performance. If they don't sell anything during a month, their salary is zero.The possible risk is that
the manager may approve credit to a friend's or relatives' business and then write off the account as
bad.
2. The situation is indeed not allowed because the warehouse clerk has custodial responsibility as well as
record keeping responsibility. The risk that can be caused from here is that the clerk may steal inventory
and use his record keeping authority to adjust the inventory records to hide the theft. It must not his
responsibility to update subsidiary ledger and at the same time prepares an inventory summary.
3. No risk can be seen in this situation. The billing clerk is actually responsible for recording sales in the
sales journal after they have been shipped to the customers.it is just right for the billing clerk to bills
customer and at the same time record the sale in the sales journal.
4. This is wrong and not allowed because is is stated in the situation that the supervisor had authority to
authorize time cards and also had asset custody and this is the employee pay check. It is actually not his
responsibility. The possible risk here is that the supervisor may submit a false time card for a terminated
or non-existent employee and then keep the paycheck that results.

Rachell Pabiona BSA - 2

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Rachell Pabiona BSA - 2

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RACHELL PABIONA

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