Interpreting Financial Reports: Internal Control Lapse
Starbucks Corporation accused an employee and her husband of embezzling $3.7 million by billing the company for services from a fictitious consulting firm. The couple created a phony company called RAD Services, Inc., and charged Starbucks for work they never provided.
The employee worked in Starbucks' Information Technology Department.12 RAD Services charged Starbucks as much as $492,800 for consulting services in a single week. For such a fraud to have taken place, certain control activities were likely not implemented.
Identify and describe these activities.