Question

Write a memo to county officials about the Sheriff’s Department’s internal control situation and management sound recommendations, using correct grammar and spelling.

• What is wrong with this situation from an internal control aspect?
• Give 5 recommendations on how you, the manager will resolve the issues. Each recommendation should be linked to each of the five (5) internal control elements. The following questions will guide you:

1. What happened at the Sheriff’s Department allowing theft to occur? As a manager, what do you recommend for this environment to tighten internal controls?
2. What is your role, as manager, to make sure that this situation, as well as other situations, within the Sheriff’s Department have effective internal controls?
3. What controls were not in place and resulted in the ghost employees? As a manager, what controls will you put in place within the Sheriff’s Department.
4. As a manager, what would you do to locate deficiencies and improve effectiveness?
5. What last element would you, as a manager, implement to address internal control?

Scenario: Highland Sheriff’s Department has a “ghost” employee problem. The auditors decided to cut payroll checks for 500 department’s law enforcement and staff, instead of processing the normal direct deposits.   On Friday, the auditor’s handed out payroll checks to employees upon identification proof. The total employees picking up checks totaled 495 employees. Auditors searched for 5 employees. After research of past checks to the 5 employees, it was determined that these 5 ‘fake’ employees have been paid $1,000,000 over the last 3 years. After reviewing the final report validating all employees and hours, the auditor noticed that the Sheriff’s name was forged and the Sheriff’s Department accountant, Missy, signed off on the report. The auditor’s office spoke with Missy and she said the Sheriff is rarely around and that employees need to be paid, so she was forced to sign the report on behalf of the Sheriff. Missy could not identify the 5 employees and neither could the auditors. The auditor is ask to meet with the Sheriff; however, he is on vacation.

Answer 1

e) 5 employees with $1M payout in 3 years

=> at 35% tax rate it is $350000 per year of Tax evasion

i.e. $1.05M of Tax evasion

Introduce checks to compare list with employees filing presentation