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Fancy Rockbottom Case Study

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1. It does not appear there were many internal controls at the country club prior to the discovery of Fancy Rockbottom’s embezzlement. Some of them include:

o The Board of Directors having broad powers to borrow money and enter into contracts as necessary. While it is important for the Board to be able to conduct business on behalf of the country club’s members, there should be mechanisms in place to have oversight before the Board enters into large financial agreements which have the potential to expose the members to liability as well. o The Treasurer is also on the finance committee but it does not say in what capacity. While it makes sense for him to have the ability to report back to the board regarding the financial position of …show more content…

I would recommend the following actions to institute effective internal controls and monitoring systems at the country club:

a. Establish comprehensive segregation of duties for the various accounting functions at the country club, including ordering, receiving, recording bills and invoices, completing checks and payments, and payroll. The segregation of duties would be developed to ensure the avoidance of overlapping of correlated activities involving the country club’s books and records.
b. The finance committee would meet on a monthly basis with the accounting department at a minimum in order to review the country club’s books and records and financial activities of the country club.
c. The finance committee would meet at least quarterly with the Board of Directors to update them about the financial status of the country club.
d. Additional safeguards would be put in place regarding the Board’s authority to borrow money and enter into contracts on behalf of the country club. After discussion with the various committees, dollar thresholds should be established that require additional approvals from the country club members before the board moves forward on items such as major expansion or renovation projects. Additionally, the Board should consult with the finance committee more frequently to be apprised of the country club’s current financial status before entering into contracts or …show more content…

The following are risk factors for asset misappropriation:
a. One person is in charge of maintaining all facets of the club’s accounting records, including ordering, billing and banking functions with no oversight
b. While dual signatures required for check writing, one person pre-signing checks defeats the purpose of this

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