Company to Prevent Fraud

It is crucial for organizations to separate the accounting function from other functions of the organization. There should be a separation of duties within a company to prevent fraud, the manipulation of numbers, and other manipulations and inaccurate data reporting. The source of the information and the information received from various sources should be reliable and accurate. If there is a separation of duties among the functions, it becomes more difficult to manipulate or create false data. As a result, accountants can rely on their data inputs without extensive research and validation of data. Keeping like business functions together also helps ensure accurate data inputs into the accounting function as well. Areas outside of the accounting departments whose compensation are dependent on company performance should be independent. If an individual has access to the inputs and creating the data used in a compensation calculation, it would be easy for that individual to create accounting data for his/her benefit. Individuals in the inventory area could falsify sales if they had access to the accounting function, this would result in internal theft; therefore separating the accounting function could further prevent internal theft.

Activity 2:

Bob should be held liable for his conduct since he exposed the company to significant risk. As a result of Bob's behavior, the company should terminate Bob's employment to set an example for the remainder of the company. The company should not tolerate an individual or group of individuals exposing a company to such great risk, especially private information. Therefore, to prevent employees from acting in a similar manner, Bob's termination should be seen as a consequence for behaviors that will not be tolerated. The company cannot prohibit Bob's behavior; instead the company can place controls and contracts into effect to discourage such behavior.