Fraudulent Act - Coursework Example

5.1) a. Indicator of fraud – Being the supervisor of the receiving department of the chain store while the owner and operator of a small boutique carrying many of the same labels signifies conflict of interest especially considering the fact, that the store’s general manager is unaware of the situation. Not informing the administration regarding his dual role as supervisor and owner of competing labels shows signs that he intends to deceive the company by diverting its assets to his personal benefit. b. Fraudulent Act – By redirecting 5-10% of the supplies to his boutiques, the supervisor is committing a fraudulent act in itself. Meanwhile, he even signed receiving reports that the total quantity of supplies had been received. There has been a false misrepresentation that the total supplies received are actually the same total of supplies sold by the chain store. c. Fraudulent Act – Entering the correct quantity on the move tickets has the intent to deceive the company that a fraud has not occurred. Therefore, the supervisor is committing another fraudulent act through circumventing the company assets to his own gain. d. Unrelated to the investigation – The statement is not related to the fraud investigation as it is assumed that while the supervisor ordered the supplies, it is being paid in its total quantity sold. Also given the fact that the management is not aware of his vested interest in the supplies received. e. Indicator of fraud – The supervisor intentionally did not compare the quantities moved to the receiving report as it would reflect the loss of company’s assets. He tries to breakdown the company’s internal control in the process, thereby indicating fraud violation. 5.2 )      A1. Fraud – “denotes a false misrepresentation of a material fact made by one party to another party with the intent to deceive and induce the other party to justifiably rely on the fact to his or her detriment… Fraud in the business environment has a more specialized meaning. It is an intentional deception, misappropriation of a company’s assets, or manipulation of its financial data to the advantage of the perpetrator” (Hall 107).      A2. Fraud deterrence – It is the practical classification of a possible fraud and its removal upon recognition. It involves both short and long term method of preventive measure. It analyzes the root cause of the fraud and enablers of fraud, however, the investigation itself shall prove to be the best line of defense against fraud as it will uncover potential fraud opportunities in the process.  A3. Fraud detection – is a process by which the historical transaction of a particular dealing is being reviewed for the purpose of validation and verification if the contract performed has the makings of a non-conforming transaction.  A4. Fraud Investigation – it is a course of action undertaken when there is a possibility of a fraud. If the opportunity to commit fraud is present and the threat is real, it conducts a study to ascertain facts whether a fraud has occurred or not.  B1. Four red flag indicators (personal) that might point to the existence of fraud are: The purchases journal clerk may lack personal codes of ethics if he allegedly enters fictitious acquisitions on the accounts payable ledger periodically. The company is vulnerable to fraud since it is a small firm and may be dominated by an individual such as the clerk who has access to the funds and books of journal. As such, it is easy for him to manipulate internal accounting controls. Given the growing financial condition of the firm, it can increase the likelihood of the clerk to commit fraud and therefore, enhance the possibility to convert the company’s assets to his personal gain. The lack of financial control is considered a contributing factor in a fraud due to available opportunity which presents him. Removal of opportunity is most effective in fraud deterrence and avoid fraud altogether. C1. The first of at least two procedures I can use to uncover fraudulent behavior of the purchases journal clerk is: 1) to lessen the chance of committing fraud, the firm, however small, must an have auditor to control and monitor the activities of the clerk, he is also in charge to look at past transactions and held the clerk liable for any discrepancy in the books of journal and 2) Through the use of proper communication techniques by the purchases journal clerk to the higher management, the chance of committing fraud is eliminated since he is aware that he is being monitored and looked closely in his activities. 5.2) David L. Miller: Portrait of a White-Collar Criminal 1. Miller fits into the profile of the average fraud perpetrator by having a high-end lifestyle and frequent job changes as manifested by possessing two Mercedez-Benz, a suburban house, condominium unit, designer clothes and jewelry for his wife, however, their were acquired during a 20-year period and after having six different employers across the state. But what makes him unique from other fraud perpetrator and also the characteristic why it is hard to detect him as a white-collar criminal, because he has proved to be an ideal employee being hard-working and dedicated to his job. In the process, he was universally well liked and admired by others. He deliberately made efforts to repay all the money stolen from his previous job until he creates another fraud in his current job. He also admits that he has a problem with compulsive embezzlement and has undergone therapy to cure his illness. 2. Miller accomplished the three elements of the opportunity triangle while working as CFO at Associated Communications by embezzling company funds while acquiring properties and leading a comfortable lifestyle. After which, he tried to conceal the crime by destroying the cancelled checks in which he retrieved from the bank after reconciling the records to avoid detection. He specifically used the Charges to Expense Accounts technique, in which, he asked another executive to make two signatures for each check before leaving on vacation as emergency fund. 3. Miller had this social pressure to be liked and admired by others through his generosity; therefore, he was motivated to commit fraud in order to support his lifestyle. He rationalized by saying that he has a problem with compulsive embezzlement and stating further, that the companies actually contributed to his subsequent thefts due to out-of-court settlement when he insists that he will pay their money back and does not pursue with the case. In his example, he starts to steal from a new employer to pay back the former one. 4. Miller’s framed T-shirt in his office with the saying, “He who dies with the most toys wins” indicates the lack of personal codes of ethics because, indeed the end does not justify the means. Miller may appear to have all the luxuries in life; however, it was not acquired through legal means. The company must be aware of its employee’s behavior and their potential to become a threat to the organization. 5. Some of the reasons why companies hesitate to prosecute white-collared criminals are to protect the identity of their employees and the company itself. It can also be a long and tedious process, in which, companies prefer to keep it to a minimum expense. The problem with this reason is that it would encourage more white-collared criminals to commit fraud since they are aware that they could easily get off the hook. Law enforcement officials should enact a law where, not only the injured party but others concerned can file a case against the fraud enabler to protect the interest of the entire business industry. 6. The primary action of each victimized company that Miller embezzled to prevent further exposure to risk is to have the internal control concept employed by each of their organization in order to safeguard the assets of their firm and ensure the accuracy and reliability of accounting records and information. By this method, they are able to promote efficient operations of the firm and measure with the management’s prescribed polices and procedures. Another control to avoid corruption of assets is the Preventive-Corrective Internal Control Model where the internal control shield is comprised of three levels of control, which are: preventive controls, detective controls, and corrective controls. SOURCE Hall, James. Accounting Information System. 5th edition. Southwestern College pub. 2006. Read More