Part of avoiding fraud is to create a positive work environment

Fraud.Ex.

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Read carefully the Case 3 (attached file) and answer the following questions:

Questions

1. Part of avoiding fraud is to create a positive work environment. Describe a few conditions mentioned within the case that could contribute to a poor work environment.

2. What symptoms should an auditor look for to determine if fraud is occurring within the retention department?

3. There are five primary control procedures or activities. List and explain which two procedures you feel would be most effective in improving the control system of the retention department. Include in your explanation specific examples of controls that should be implemented. 

Instructions:

  • Your paper is to be clear and concise.
  • No page limit.
  • Use the textbook as your reference. (Fraud Examination, 5th Edition, Steven A. Albrecht et. al.,ISBN-13: 978-1-305-07914-4)

Case Study 3

ABC satellite, a satellite television company, sells satellite television service contracts to customers, usually fora 24-month period. ABC satellite is a fast growing, high paced company created by aggressive salesmen. The company’s success has made its owners very wealthy, many of them live a lavish lifestyle and drive luxury cars to work. The retention division of this company is responsible for contacting customers nearing the end of his/her contract and convincing the customer to renew his/her contract. Retention agents are paid a commission for each account that agrees to a new contract. The commission rate is considered by many employees to be below the industry standard. Over the past year, the retention division has undergone significant supervisor and manager turnover. The current manager has not had sufficient time or understanding to properly implement controls.

Additionally, the new manager has been so busy playing catch up that he has yet to hold a training or orientation meeting for his department. The current process for paying commissions to retention agents on renewed accounts is as follows:

*The phone system records the verbal contract extension commitment.

*The retention agent attaches the audio recording to the customer’s account in the ABC customer contract system (CCS); this acts a legal proof of contract.

*The retention agent then updates the customer contract date information in CCS. Each retention agent has a spreadsheet he or she uses to keep track of the account renewals for the month.

*The retention agent records the customer #, date of contract extension, and length of contract extension in his/her spreadsheet.

* At the end of each month the retention supervisor receives each agent’s spreadsheet and multiplies the total retention renewals submitted by the agent by his/her commission rate in order to calculate the total monthly commission.

*The spreadsheets are not maintained by the supervisors.

* In order to get the payments processed quickly, the supervisors have less than 4 hours to receive all agents’ spreadsheets (usually each supervisor is responsible for 20+ agents) and submit the summary file to payroll.

*The supervisor records the total commission earned by each agent on a summarized spreadsheet, which is sent directly to payroll for payment.

Questions

1. Part of avoiding fraud is to create a positive work environment. Describe a few conditions mentioned within the case that could contribute to a poor work environment.

2. What symptoms should an auditor look for to determine if fraud is occurring within the retention department?

3. There are five primary control procedures or activities. List and explain which two procedures you feel would be most effective in improving the control system of the retention department. Include in your explanation specific examples of controls that should be implemented.

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