How bennys bad behavior could have been prevented

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Reference no: EM133415897

Question: Back in the early 1900s, Arthur worked for company called James H. Rhodes & Company. Arthur hired his brother Benny to be his chief financial officer (CFO) and places other members of the family in key management positions. As the company moved into the 1920s, Benny was a model employee; he worked long hours, never took vacations, and made sure that he personally managed all aspects of cash functions. For example, he handled the entire purchasing process - from issuing purchase orders through the disbursement of cash to pay bills. He also handled the cash side of the revenue process by collecting cash payments, preparing the daily bank deposits, and reconciling the monthly bank statement.

External audits were not yet required for public held companies, and the SEC had not yet been formed. Jim, the accountant, was eventually able to determine that Benny had diverted company funds to himself by setting up false vendors hand having checks mailed to himself. He also diverted some of the cash payments received from customers and was able to hide it by handling the bank deposits and the reconciliation of the company's bank accounts. Eventually, Jim determined that Benny had embezzled about $500,000 in 1930 dollars (about $46.67 million in today's dollars). Benny "disappeared" and was never heard from again.

Talk about how Benny's bad behavior could have been prevented. Using 2013 COSO IC components ( control environment, risk assessment, control activities, information and communication, and monitoring ) in your answer as support for your conclusion.

Reference no: EM133415897

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