STEPHANIE

BASKILL

(Internal Control and Fraud)

an unemployed accounting clerk who lives one block from

Cleaver Manufacturing Company. She gained an unrestricted
access to the said the company through the ERP manuals sh
found in the dumpsters that were dated 2 months prior.
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BATAC-EDILLON- GAA-SIBUG-TUAO

Control Structure Weaknesses

1. Control over output documents
ERP manuals were discarded in a manner that they can still be
retrieved.
Specific Control Techniques and Procedures
a. Store the documents in a safe place in the
companys premises while still relevant
-With this, the output documents of the company wont be
easily accessed and read by anyone especially by outsiders.
b. Shredding or incinerating of documents before
discarding them
-Knowing that documents of the company are vital to the
companys success, they should be given proper protection
even when discarding them from the company. In this way,
even if the documents would be out of the companys
premises, there would be no way that they can be retrieved.

Control Structure Weaknesses

2. Inadequate prevention controls regarding the
operating system
-Stephanie Baskill was able to obtain access of the companys
files through the application of the Trojan horse technique.
Specific Control Techniques and Procedures

c. Prevention controls in the operating system

-The company must equip its computer system with a
firewall and antivirus software programs to reduce, if not
totally eliminate, risks of files being accessed or even
destroyed and corrupted. These are some ways of
preventing the computer systems to be infected by
malicious and destructive programs.

Control Structure Weaknesses

3. Inadequate detection controls regarding the
operating system
-The company was not able to detect right away the fraud
made by Stephanie that made it lose, on average, 125,000
dollars a month. It was only detected after 16 months, which is
a very long
time Control
for the company
notand
to make
a move.
Specific
Techniques
Procedures
d. Detection controls in the operating system
--There must be a personnel of the company that is
assigned of reviewing the adequacy of the operating
system. After detecting threats or destructive programs in
the operating systems, appropriate actions must be
undertaken as soon as possible.

Control Structure Weaknesses

4. Inadequate review of transactions and companys
records
-Changes in the transaction logs made by Stephanie were not
noticed. This is either because, management reports were not
properlySpecific
reviewed
or changes
were not
reflected and
Control
Techniques
andproperly
Procedures
recorded.
e. Proper and frequent review should be conducted
-Management should properly and carefully review any
changes or additions to vendors or suppliers list that were
reflected for accuracy.
f. Message Sequence Numbering and Message
Transaction Log must be implemented

- END -

GROUP #3

BATAC-EDILLON-GAA-SIBUG-TUAO