Roundtable

Internal Auditor, June, 1997 by E. Theodore Keys, Jr.

The auditors reviewed the DOR's workpapers and supporting documents for each purchase greater than $10,000 in the areas of inventory, fabrication of tangible personal property, and miscellaneous transactions. Based on exemptions provided by the state tax code, the auditors were able to identify reductions in the assessment of more than $3,000,000. Elimination of the associated interest and penalties reduced the tax bill to less than 20 percent of the original assessment.

Florida West Coast Chapter

* $31.5 Million

A manager at a U.S. business received a request for personal assistance and cooperation in acquiring $31.5 million dollars in U.S. currency from a bank located in another country. The request indicated that the money was left over from an engineering contract. Because the funds were deposited in a U.S. bank, only a U.S. native could claim the money. The manager requested help from the internal audit staff to find out if the person making this offer existed anal if the offer was legitimate.

The auditor assigned to the task noticed that the letter was dated nine months prior, but the mailing date on the envelope was only ten days prior. Hoping the ambassador of the country where the money was supposedly located could help, the auditor called the country's embassy in Washington, D.C.

The embassy employee had never heard of the project mentioned in the letter, nor had he heard of the $31.5 million dollars that was allegedly deposited in a U.S. bank. However, the embassy employee said he would investigate and call the auditor back. The next day, the employee called and explained that the sender of the letter was in prison and had been sending letters to many people in the U.S. There was no engineering contract, nor was there any money.

Contributed

* Excess Postage

A consumer products company developed a promotion and contracted with a fulfillment company to handle the promotional rebates. The contract stated that postal charges for the rebate checks would be billed at the current rate. The fulfillment company charged the non-sorted, non-bulk first class rate of 19 cents for each check that was mailed.

The internal auditors found that the fulfillment company's computer system generated checks in zip code order, which qualified the checks to be mailed at pre-sorted, bulk mail rates, ranging from 15.5 cents to 17.7 cents, depending on the volume. The lower postage rates and increased mail volume were considered substantial justification for outsourcing the rebate service to a fulfillment company. However, the auditors found that the company had instead paid an excess of $38,000 in postage charges, which was more than the actual charges paid by the fulfillment company to the U.S. postal service.

Mt. Diablo Chapter

* Lots of Entertainment Duties

In reviewing expense reports for marketing representatives, the recently installed director questioned several expenses submitted by one particular employee and submitted them to internal auditing for further review. Plotting the questionable expenses on a calendar revealed that the employee had billed the company for dinner almost every weeknight and occasionally submitted bills for two dinners on the same night. On two occasions, the employee had paid for a hotel room in his sales territory while traveling at the same time to a meeting at corporate headquarters in another city. The employee had also hosted golf outings with clients up to three times a week. Of course, all the expenses were incurred at high-quality establishments.