Case 5-2: Lexsteel Corporation

What should the comptroller of Lexsteel do in rules of order to address the potential problems within the corporation? The controller became awargon of the potential problems with the ac amounts due system because of the treatment made with the external auditors. Each offset printing tutor is given the sureness to order materials and issue extremity purchase orders in a flash to the vendors. Physical counts of lancinating materials ar non performed since there is a cost-effective calculatorized continuous livestock system. COMPUTER RESOURCESThe host estimator central processor at corporate headquarters is linked to the computers at each branch locations. Data transmission hands amongst leased telephone lines surrounded by host computer and branch offices wherein it is maintained in an integrated selective informationbase. The softw ar package also allows flexibility for managing user access and modify info input meaning there is no control over the software for it allows data redaction without the straight-laced authorization given. PURCHASING PROCEDURES The production orders and get bills of materials needed are generated by the host computer at corporate headquarters.While the purchase orders for raw materials are generated by the purchasing function and is send out to the vendors which contain an instruction to the vendor that the materials should be nowadays delivered to the manufacturing plant. There is a control between the times of production orders needed and the purchase orders issued to the vendor however it is not an exception in the occurrence of fraud. At receipt, the manufacturing plant examines and verifies the count against the packing slip and transmits the receiving data to the accounts payable at corporate headquarters.Even though there is a proper segregation between custody and recording, still fraud may occur because of collusion. Also, each branch manager is given the authority to order materials and issue e mergency purchase orders outright to the vendors. Fraud may also occur if collusion will be made by the branch manager and the vendor, with that proper control is a must. Since the bon ton employs a cost effective computerized perpetual inventory system, physical counts of raw materials are not performed.With that, the generation of production orders and purchase orders may be deceived because the count of raw materials that are needed are not matched with the proper physical count on its determination inventory. ACCOUNTS PAYABLE PROCEDURES Vendor invoices are mailed directly to the corporate headquarters and entered by the accounts payable force play when received. This often occurs before the branch offices transmit the receiving data so the recorded vendor invoices are not properly matched with the receiving report. Uncertainties of amount may exist.The checks and the remuneration listings are made by the accounts payable function and are transmitted to the treasurers office for touch sensation and mailing to the payee. After validation, payment listings are returned to the accounts payable section for filing. In here, there is no proper control in the preparation and validation of checks and payment listings for the verification of it is not done which may final result into collusion and creation of dummy payee made by the treasurers office and the accounts payable function.