The week 5 assignment is a very interesting assignment. It gives you the opportunity to do a little forensic audit. The Bookkeeper Bret Turrin is cooking the books and taking some cash from the business for his personal use. You have been brought in as an expert to help uncover the theft by reconciling the bank statement properly.
What I would like you to do is prepare the bank reconciliation using the excel spreadsheet answer the questions in the notes section of the excel template. Then instead of the 1050 words paperprepare a memo to the Controller explaining your findings and recommendations for controls over cash to prevent this situation from happening in the future. Incorporate your answers to the initial assignment questions as part of your memo to the controller. Please use the internal controls referenced in the lessons that we are covering. This means you will have to understand the objectives noted in your course text.
Part (b) of the template will be your answer to the first question: Indicate the three ways that Bret attempted to conceal the theft and the dollar amount involved in each method.
Part (c) of the template will be your answer to the second question: What principles of internal control were violated in this case?
Anticipated Questions you may have:
What is a Controller? The controller in a company is the head of the accounting department. This person is responsible for all the accounting functions of the business. The controller reports to the CFO or V.P. of Finance – depending on the size of the company. The accounting manager bookkeeper accounting clerks and all other staff in the accounting office will report to the controller.
What is a Forensic Audit? In a forensic audit the company conducts an examination of their records internal controls systems and procedures in search of evidence weaknesses and behaviors that shed light on fraud in the company. This is a general explanation of a forensic audit.
For those of you who have never written a memo I have included information on how to access a template and link to a library article about business memos. On the job you would attach the memo to an e-mail and send it to the controller or you would create a memo e-mail attach your bank reconciliation your official memo of findings and any other evidence or created files.
To access a memo template from your word document page:
Select File
Select New
In the search space type memo and press the enter key
Choose the Memo (simple style)
Assignment Steps
Resources:Financial Accounting: Tools for Business Decision Making
Scenario:Daisey Company is a very profitable small business. It has not however given much consideration to internal control. For example in an attempt to keep clerical and office expenses to a minimum the company has combined the jobs of cashier and book-keeper. As a result Bret Turrin handles all cash receipts keeps the accounting records and prepares the monthly bank reconciliations.
The balance per the bank statement on October 31 2017 was $18380. Outstanding checks were No. 62 for $140.75 No. 183 for $180 No. 284 for $253.25 No. 862 for $190.71 No. 863 for $226.80 and No. 864 for $165.28. Included with the statement was a credit memorandum of $185 indicating the collection of a note receivable for Daisey Company by the bank on October 25.
This memorandum has not been recorded by Daisey.
The company’s ledger showed one Cash account with a balance of $21877.72. The balance included undepositied cash on hand. Because of the lack of internal controls Bret took for personal use all of the undeposited receipts in excess of $3795.51. He then prepared the following bank reconciliation in an effort to conceal his theft of cash:
Cash balance per books October 31
Add: Outstanding checks
No. 862
No. 863
No. 864
Less: Undeposited receipts
Unadjusted balance per bank October 31
Less: Bank credit memorandum
Cash balance per bank statement October 31
Prepare a revised bank reconciliation using the provided Excel spreadsheet.
Prepare a memo to the Controller of Daisey Company explaining your findings and recommendations for controls over cash to prevent fraud from happening in the future. Incorporate in your memo to the Controller the following:

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