Question - As a fraud investigating officer, you have been assigned to investigate test of controls on the sales system at EDB Pty Limited as part of the 30 June 20X7 audit records. EDB is a wholesaler of bathroom supplies such as vanities, toilets, taps and sinks. During testing, you noted the following errors:

i) Invoice number 54922, issued on 12 December 20X6, was entered twice. The error was discovered when the customer rang to complain about being charged double the agreed amount.

ii) Invoice number 51839, issued on 25 September 20X6, contained incorrect prices. 3 vanity units were charged at $453 instead of $543 each and 5 sinks were charged at $231 instead of $312 each. The error was discovered when the salesperson complained about not receiving their full commission entitlement for the month.

iii) No prices were entered on invoice number 56329, issued on 24 January 20X7, resulting in a zero dollar invoice being issued. The error was discovered when accounts receivable staff queried the zero amount appearing on the accounts receivable ledger.

iv) Invoice number 59328, issued on 18 March 20X7, matched the customer's order. However, the order was only partially filled owing to a lack of stock in the warehouse, with the result that items were included in the invoice that were never delivered. The error was discovered when the customer rang to complain about being overcharged.

v) Invoice number 61348 , issued on 7 May 20X7, was sent to the wrong address. Apparently the invoice had the correct address on it, but a typing error occurred on the envelope. The error was discovered when the customer rang to complain about the overdue notice they received, stating they had never received an invoice in the first place.

vi) Invoice number 62875, issued on 29 June 20X7, was not processed through the usual channels. Although the invoice details were correct, certain procedures, such as a formal credit check, were not documented. The invoice was a special order for a large building project and amounted to around 10 times the value of EDB's average invoices. The sale was personally handled by one of the directors and the invoice prepared by his assistant.

Required: Treating each of the above errors independently:

a) Describe application controls, both manual and IT, which would have either prevented or detected the error.

b) What further work would you perform in relation to the error?

c) What are the implications of the error for your testing of accounts receivable?

d) Explain how accounting fraud might be perpetrated or concealed through accounts receivable account.