Accounting: Competent Personnel and Rotating Duties

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  • Topic: Kong Hee, Business, City Harvest Church
  • Pages : 8 (2295 words )
  • Download(s) : 477
  • Published : January 27, 2013
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Short summary of the article 1.
Two former Singapore Land Authority (SLA) officers, Former deputy director of technology and infrastructure, Koh Seah Wee, 41, was sentenced to 22 years in jail, and his subordinate, former manager Lim Chai Meng, 38, was sentenced to 15 years for being involved in a $12 million fraud case. With the help of seven other external parties they were able to create fraud by altering the accounts. They misused the company’s money for their own use.

With the money they divested cash to various accounts to their relatives and invested in private properties, unit trusts, stocks and shares. Koh also bought his wife and mother-in-aw two luxury cars worth up to about $1.9million.

A) Internal Control
1.Competent personnel and rotating duties: Allowing accounting employees must be adequately trained and supervised in performing their jobs. It may also be advisable to rotate duties of employees. In this way, existing errors or fraud may be detected. They failed to hire competent personnel, former manager, Lim Chai Meng was not adequately trained and supervise in his job.

Quote from article: “Working in collusion with seven external parties, the men had - in the time between Jan 2008 and March 2010 - cheated SLA by rendering false invoices through various business entities for IT services and goods which were not delivered.” 2.Proof and security measures: Proofs and security measures should be used to safeguard assets and ensure reliable accounting data. This control procedure applies to may dfferent technique, such as authorization, approval, and reconciliation procedures. The company fail to have authorisation of approval for invoices by reliable accounting data. Therefore Koh and Lim were able to render the invoice and embezzle the company’s funds.

Quote from article: “In all, SLA paid $12.2 million in 282 contracts to 11 bogus vendors. To date, $9 million out of the total amount has been recovered” 3.Separating responsibility for related operation: To decrease the possibiity of errors, and faud, the responsibiity for related operations hould be divided among two or more persons. The company should have divide the operation of ordering, delivering and checking off goods between employees instead of letting koh and lim do the work alone. Furthermore they have seven external parties to help them with the fraud.

Quote from the article: “Working in collusion with seven external parties, the men had - in the time between Jan 2008 and March 2010 - cheated SLA by rendering false invoices through various business entities for IT services and goods which were not delivered.”

B) Learning point
We have learnt that when we start a business we should hire competent personnel and personnel who are trustworthy. The deputy director who is in charge of SLA should set a good example for his employees, Instead of embezzling the company’s fund.

Failing to have authorized approved invoice, employees can therefore alter the invoices and take the company money without any acknowledgement.

If company do not divide the responsibilities among different department, employees who are tasked to do two different departments can easily create fraud. External parties play a big part in helping to embezzle one’s company money as they work together to create fraud.

C) Recommendation
Companies should spend money to do background checks on their staff such credit check, criminal records, verify their resume. By doing so, they would know if the employees are financially stable, facing any debt, etc before hiring them and not hire problem employees.

Also, keep in mind that the most loyal employees can take advantage of you. Even if someone's your best employee, you need to have checks and balances so they don't control everything

Invoices should be authorized and approved by the head of department before going ahead with the procedures. This will allow the head to be acknowledged of the procedures...
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