Describe fraud and its impact; evaluate internal controls
Response to the following problem:
English Imports is an importer of silver, brass, and antique furniture items from England. Patricia Kregg is the general manager of English Imports. Kregg employs two other people in the business. Polly O'Hara serves as the buyer for English Imports. In her work, O'Hara travels throughout England to find interesting new products. When O'Hara finds a new product, she arranges for English Imports to purchase and pay for the item. She helps the English artisans prepare their invoices and then faxes the invoices to Kregg in the company office. Kregg operates out of an office in Boston, Massachusetts. The office is managed by Lesley Luck, who handles the mail, keeps the accounting records, makes bank deposits, and prepares the monthly bank reconciliation. Virtually all of English Imports' cash receipts arrive by mail- from sales made to Target, Pier 1 Imports, and specialty shops. Luck also prepares checks for payment based on invoices that come in from the suppliers who have been contacted by O'Hara. To maintain control over cash payments, Kregg examines the paperwork and signs all checks.