Loss Prevention Policies 2

Posted: September 3rd, 2013















Loss Prevention Policies 2






Loss Prevention Policies 2

What are the benefits of a comprehensive control program? If you were advising this corporation, what would be the specific benefits for them?
An internal control system can be described as the collective systems of monitoring and controlling the financial and functional aspects of an organization for the sole purpose of detecting or preventing fraud and ensuring the achievement of the organizational set goals. Deterrence to fraud is only through a comprehensive control program in any organization. However, a control programme does not sufficiently eliminate the chance of fraud but only reduces the chance of fraud in an organization. A good internal control system aims at ensuring the activities and functions of the organization are planned adequately for effectiveness and efficiency purposes (Robertson, 1976). A good internal control also ensures that the management or organizational set goals are followed effectively. In addition, a good control system also ensures that the organization’s assets are adequately protected from loss. Furthermore, a good control system also ensures that the Organization’s records and information are accurate and sufficient for use in tax purposes on financing purposes.

A good internal comprehensive control programme enables the delegation of specific tasks to the staff such that any disparities from the required information or goals a specific employee is able to answer comprehensively for the reasons as to the deviations. For example, a cashier is able to explain the reasons for the differences in cash received and the cash amounts. Internal controls also deter employees from fraud whereby an employee is very vigilant in execution of his or her duties for the reason that any disparities in the results the individual is held responsible. Delegation also reduces the duplication of work and reduces the confusion that would arise from such an action. It also enables the organization to save on costs associated with redundancy of work whereby employees would be paid for identical tasks. A comprehensive control programme provides assurance to the organization’s financiers who are guaranteed that the internal control system is set to protect their interests and safeguarding the company’s assets (Goldman, 2009). A good internal control system would also enable the organization’s management to assess the organization’s level of productivity whereby any deviations from the set goals would require more scrutiny. A good internal control also enables the management to demonstrate its efforts and ability to safeguard the organization’s interests and assets (Cangemi &Singleton, 2003).

What would be the procedures that should be considered for detective controls, including independent checks and a system for documents and records?

Every financial transaction should be approved by the relevant authority to ensure that all transactions in the organization are duly approved to prevent loss. Surprise audits would also b effective in detection of fraud such that in the event an employee is involved in fraud, it becomes impossible or difficult for him to conceal the fraud, as he does not know when an audit is to take place. The organization should also perform substantive analytical tests such as the comparison of revenue form different periods to understand the performance of the organization. Comparison of costs and revenues in the organization would also explain the trends in the organization and detect any unusual trends, which might be because of fraud (Cangemi &Singleton, 2003).

With the use of technology, the organization should consider the use of Computer Aided Audit Techniques (CAATs). CAATs ensure consistency in the entry and output of financial data such that any disparities from the expected results (Georgiades, 2006). The organization should also ensure the confirmation of transactions with its suppliers and customers by verifying the criteria used and payment processes involved. This also ensures that the transactions were legitimate and at the same time confirm the amounts involved in the transactions. In terms of supplies, the organization should also verify identical transactions in the current market prices. An organization should also ensure that there is presence of a responsible official in the receipt of supplies and physical verification. For an organization involved in manufacturing, it would be essential in establishing the actual quantities of the supplies and the work in progress by physical verification by a senior employee to ensure that there are no losses or misuse of the products (Georgiades, 2006). The organization should also evaluate its forecast and compare them with the current results. In addition the Organization can use substantive tests of detail whereby a sample is selected form a set of transactions form the major account balances and compared with the actual balances evidenced in records such as invoices ,bank statements, receipts which are directly related to those items in question (Georgiades,2006).

Discuss the possibility of a fraud hotline as part of your program. How can a hotline be implemented as a tool for preventing and detecting fraud? Provide an overview of steps that you would take for a successful implementation if the corporation wanted this option.

         A hotline can be used by the organization to effectively counter incidence of fraud that have not been revealed in the organization, Such revelations of fraud might involve  the most senior officials in an organization who are not even suspected of fraud’s hotline can be used by the organization to reveal organizational discrepancies. A hotline can be managed externally or internally. In internal management, the organization can use it employees or hire new employees with the relevant communication skills to manage the hotline ( Goldman,2009).

In an externally managed system, it would require the organization to set aside adequate resources to outsource such services to an independent provider. An external hotline provider would be the best for the organization because it is beyond reach of the personnel of an organization. Senior personnel involved would want to manipulate the hotline such that fraud is not revealed. However, it would prove to be very expensive for the organization to have an externally operated hotline. An internally managed hotline has to follow certain basic steps to provide satisfactory results to the organization, which are as follows (Goldman, 2009)

  1. The receiver must practice confidentiality such that when receiving calls the caller must be assured of confidentiality and that the caller does not have to identify himself unless the caller specifically asks to be identified.
  2. The receiver must provide for the recording of the specific time and date of the call.
  3. Records of the operator’s name, identification number and location should also be provided.
  4. The receiver should assign the caller with an identification code or number for easy reference.
  5. The receiver should ask if the caller is an employee, a supplier, a contractor or more so a customer.
  6. The receiver should ensure that the caller adequately divulges all the details with regard to the fraud incident and ensure to get specific details of the callers involvement.
  7. The receiver should ask the caller to provide sufficient evidence in whatever form.
  8. The receiver should inform the caller to that there is an opportunity to provide more information that might enable the organization to arrest such an incident and prevent it from happening later date (Goldman, 2009).


Cangemi, M. P., & Singleton, T. (2003). Managing the audit function: A corporate audit department procedures guide. Hoboken, N.J: J. Wiley & Sons.

Goldmann, P. (2009). Anti-fraud risk and control workbook. Hoboken, N.J: John Wiley & Sons.

Georgiades, G. (2006). Audit procedures. Chicago, Ill: CCH.

Robertson, J. C. (1976). Auditing. Dallas: Business Publications.



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