Levon Helm was a kind of one-man mortgage broker. He would drive around Tennessee looking for...

80.2K

Verified Solution

Question

Accounting

Levon Helm was a kind of one-man mortgage broker. Hewould drive around Tennessee looking for homes that had secondmortgages, and if the criteria were favorable, he would offer tobuy the second mortgage for “cash on the barrelhead.” Helm boughtlow and sold high, making sizable profits. Being a small operation,he employed one person, Cindy Patterson, who did all hisbookkeeping. Patterson was an old family friend, and he trusted herso implicitly that he never checked up on the ledgers or the bankreconciliations. At some point, Patterson started “borrowing” fromthe business and concealing her transactions by booking phonyexpenses. She intended to pay it back someday, but she got used tothe extra cash and couldn’t stop. By the time the scam wasdiscovered, she had drained the company of funds that it owed tomany of its creditors. The company went bankrupt, Patterson didsome jail time, and Helm lost everything.

Requirements

What was the key control weakness in thiscase?

Many small businesses cannot afford to hire enoughpeople for adequate separation of duties. What can they do tocompensate for this?

Answer & Explanation Solved by verified expert

3.6 Ratings (372 Votes)

Ans 1 Segregation of duties is the key control weakness in this case There should not be the one person who is responsible for accounting records and funds also Here in the given case Patterson had access to See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member