Problem 4-21 Using internal control to restrict illegal or unethical behavior Required For each of the following fraudulent acts, describe one or more internal control procedures that could have prevented (or helped prevent) the problems.

Required:

a. Paula Wissel, the administrative assistant in charge of payroll, created a fictional employee, wrote weekly checks to the fictional employee, and then personally cashed the checks for her own benefit.

b. Larry Kent, the receiving manager of Southern Lumber, created a fictitious supplier named F&M Building Supply. F&M regularly billed Southern Lumber for supplies purchased. Kent had printed shipping slips and billing invoices with the name of the fictitious company and opened a post office box as the mailing address. Kent simply prepared a receiving report and submitted it for payment to the accounts payable department. The accounts payable clerk then paid the invoice when it was received because Kent acknowledged receipt of the supplies.

c. Holly Baker works at a local hobby shop and usually operates the cash register. She has developed a way to give discounts to her friends. When they come by, she rings a lower price or does not charge the friend for some of the material purchased. At first, Baker thought she would get caught, but no one seemed to notice. Indeed, she has become so sure that there is no way for the owner to find out that she has started taking home some supplies for her own personal use.