AIS Case #1:
Chapter 3: Coupon Accounting #52

In order for a fraud to be perpetrated, three conditions must exist. According to Turner and Weickgenannt (2012), “known as the fraud triangle” (p. 80) they are conditions, incentive, opportunity, and rationalization to commit fraud. By understanding these conditions businesses will be able to create effective and quality internal controls system that will help prevent fraud and fraudulent financial reporting, such as the one presented in this case. Even so, with the best set of controls businesses are still susceptible to fraud. As I examined this case study concerning coupon accounting abuse I 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.
a. Discuss whether the situation described can happen to a company with a good control environment. It is imperative for a company to have good internal control environment. Internal control is defined as, “policies and procedures designed to provide management with reasonable assurance that the company achieves its objectives and goals” (Arens, Elder & Beasley, 2012, p. 290). Thus, internal control ensures all business or organizational processes meet these demands. A company that has a good control environment will help deter fraud. According to Turner and Weickgenannt (2012), “The control environment sets the tone of an organization and influences the control consciousness of its employees” (p. 93). As the foundations for all other components of internal controls, a company with a good control environment, one that has establishes an operating style that is more conservatives could prevent the situation from happening. With that said, companies with a “less risky” control environment factors such as philosophy, operating style, attention and direction by the