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ACC 205 WEEK 4 DQ 1 Fraud Case Analysis: Key Control Weaknesses and Mitigation Strategies for Small Businesses

Analysis of fraud cases and mitigation strategies in small businesses.

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Fraud Case Analysis: Key Control Weaknesses andMitigation Strategies for Small BusinessesACC 205 WEEK 4 DQ 1Fraud Case 7-1Levon Helm was a kind of one-man mortgage broker. He would drive around Tennesseelooking for homes that had second mortgages, and if the criteria were favorable, he wouldoffer to buy the second mortgage for “cash on the barrelhead.” Helm bought low and soldhigh, making sizable profits. Being a small operation, he employed one person, CindyPatterson, who did all his bookkeeping. Patterson was an old family friend, and he trustedher so implicitly that he never checked up on the ledgers or the bank reconciliations. Atsome point, Patterson started “borrowing” from the business and concealing hertransactions by booking phony expenses. She intended to pay it back someday, but she gotused to the extra cash and couldn’t stop. By the time the scam was discovered, she haddrained the company of funds that it owed to many of its investors. The company wentbankrupt, Patterson did some jail time, and Helm lost everything.Requirements1.What was the key control weakness in this case?2.Many small businesses cannot afford to hire enough people for adequateseparation of duties. What can they do to compensate for this?Fraud Case 7-1Solution:1.There was not separation of duties between cashdisbursements and recording transactions in the

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University
National University
Subject
Accounting

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