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Essay / Research Paper Abstract
A 6 page paper examining the failure of internal controls that resulted in losses to the organization or to its stockholders. Examples include Enron of course, but also a small Alabama trucking company and the National Australian Bank (NAB). The paper concludes that a standard approach to computer programming is that someone takes a newly-finished product and sets out to make it crash or otherwise break it. Adopting the same approach to testing of internal controls likely would be advisable, because when it is discovered that internal controls were not sufficient to deal with the threat that existed is far too late. Bibliography lists 8 sources.
Page Count:
6 pages (~225 words per page)
File: CC6_KSacctIntContFail.rtf
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Unformatted sample text from the term paper:
Writing a decade ago in a pre-Enron, pre-Worldcom world, Labrack (1994) provides a lengthy account of how she, as a management accountant and controller for a small company, was seen
as being the jack-of-all-trades and for years handled everything that had to do with finances in any regard. Labrack (1994) kept all financial records; managed personnel and payroll; and
acted as the companys purchasing agent. Even a decade ago the arrangement was a recipe for disaster, a disaster that did not occur because of Labracks (1994) high level
of personal integrity and her commitment to ethical accounting practice and principles. In todays world where enhanced corporate governance has been legislated in
the form of Sarbanes-Oxley, perhaps scenarios such as that which Labrack (1994) describes will cease to be commonplace. In the meantime, there are many examples of how internal controls
either did not exist or totally failed. Loss Examples An Alabama Trucking Company One of the greatest problems that small businesses face in
terms of accounting and control is the lack of sufficient numbers of employees that would enable separation of duties. "When the person who signs the checks is the same
one responsible for approving purchase orders and adding new personnel to the payroll system, the opportunity for abuse is readily apparent" (Small business - where fraud can and does occur,
2003; p. 3). Of course fraud can occur in larger companies, but small ones operate under the greatest risk. In its 2002 Report to the Nation on Occupational
Fraud and Abuse, the Association of Certified Fraud Examiners (ACFE) reports that "the per-employee losses from fraud in the smallest businesses are 100 times the amount of their largest counterparts"
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