Part 1
One of the major risk factors of fraud is the assignment of a wide range of duties to each employee (Stone, 2009). This risk factor gives them numerous opportunities to commit fraud. An auditor should evaluate the level of this risk by checking the job description of each employee. The duties of each employee should be well defined so as to enable the auditor to see the loopholes in the company operations. These loopholes enable employees to commit fraud without being discovered. A good example is where an employee requests the supply of some goods to the company; the same employee receives the goods; and then the same employee authorizes payment to the supplier. Such an employee can overstate the quantity of the goods supplied to the company because he is the same person who receives the goods. He can then make false payments for goods that were not supplied to the company. It is important that each stage of the company’s operation be manned by different people. The separation of duties will enable other employees to prevent the occurrence of fraud by reporting when they suspect that somebody is attempting to commit fraud.
The auditor can evaluate this risk by requesting a list that contains the duties of each employee. The list of duties will make it easy for the auditor to see where duties are overlapping each other. He will also be able to see if there are some areas that are left unsupervised and open to fraud.
Part 2
The best policy to counter the risk of “Assigning a wide range of duties for each employee giving them opportunities to commit fraud” is the separation of duties. The policy will entail the separation of key duties so as to create a good internal control system. The policy will ensure that an employee is not in a position where he is able to commit a fraud as well as conceal the fraud. Some of the duties that need to be separated include custody of assets; approval or authorization of transactions related to the assets in custody; and the reporting or recording of the transactions that are related to the assets in custody (Stone, 2009). These three duties need to be performed by different people.
References
Stone, N. (2009, Apr 1). Simplifying Segregation of Duties. Internal Auditor. Retrieved from: https://iaonline.theiia.org/simplifying-segregation-of-duties
