Coupon Accounting Abuse

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Case Study One
Coupon Accounting Abuse

The incentive, opportunity, and rationalization to commit fraud have plagued business organizations for many years. There are numerous ways that managers and employees can commit fraud. This makes it a necessity for businesses to have quality internal controls that help prevent fraudulent activity. However, even with the best set of controls businesses are still susceptible of fraud. This paper will concentrate on the case study concerning coupon accounting abuse and will answer questions pertaining to company controls, ways to prevent coupon abuse, parties who may be harmed, and the type of fraud presented in the case.

Coupon Accounting Abuse
Question 1: Discuss whether the situation described can happen to a company with a good control environment.
It is imperative for a company to have good accounting internal controls. A company that has a good control environment will help deter fraud, but these controls can only provide a company with reasonable assurance. In this situation the brand manager is committing the fraud. This would make it very hard even for a company with good controls to detect fraud. In what is known as management override, managers can simply circumvent a company’s internal controls. Question 2: Describe any steps a company could take to prevent such abuse.

There are many steps that a company can take to prevent fraud abuse. A company should implement a strong code of ethics policy. Every manager and employee should be trained and very aware of the policy. This will help in maintaining the integrity of the workforce. There should be a strong screening process that includes background checks to help ensure the company is hiring honest employees. There should also be a segregation of duties. In this case the brand manager has complete control over estimating the coupon liability. This estimate should be approved by another manager at the company. The company should...
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