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Stone Holidays is an independent travel agency. It does not operate holidays itself. It takes commission on holidays sold to customers through its chain of...

      

Stone Holidays is an independent travel agency. It does not operate holidays itself. It takes commission on holidays sold to customers through its chain of high street shops. Staff are partly paid on a commission basis. Well-established tour operators run the holidays that Stone Holidays sells. The networked reservations system through which holidays are booked and the computerised accounting system are both well-established systems used by many independent travel agencies. Payments by customers, including deposits, are accepted in cash and by debit and credit card. Stone Holidays is legally required to pay an amount of money (based on its total sales for the year) into a central fund maintained to compensate customers if the agency should cease operations.

Describe the nature of the risks to which Stone Holidays is subject arising from fraud and error.

  

Answers


Wilfred
Nature of risks arising from fraud and error: Stone Holidays

Stone Holidays is subject to all of the risks of error arising from the use of computer systems.
If programmed controls do not operate properly, for example, the information produced may
be incomplete or incorrect. Inadequate controls also give rise to the risk of fraud by those who
understand the system and are able to manipulate it in order to hide the misappropriation of
assets such as receipts from customers.
All networked systems are also subject to the risk of error because of the possibility of the
loss or corruption of data in transit. They are also subject to the risk of fraud where the
transmission of data is not securely encrypted.
All entities that employ staff who handle company assets (such as receipts from customers)
are subject to the risk that staff may make mistakes (error) or that they may misappropriate
those assets (fraud) and then seek to hide the error or fraud by falsifying the records.
Stone Holidays is subject to problems arising from the risk of fraud perpetrated by customers
using stolen credit or debit cards or even cash. Whilst credit card companies may be liable
for such frauds, attempts to use stolen cards can cause considerable inconvenience.
There is a risk of fraud perpetrated by senior management who might seek to lower the
amount of money payable to the central fund (and the company’s tax liability) by falsifying
the company’s sales figures, particularly if a large proportion of holidays are paid for in cash.
There is a risk that staff may seek to maximize the commission they are paid by entering
false transactions into the computer system that are then reversed after the commission has been paid.
Wilfykil answered the question on April 12, 2019 at 09:41


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