Fraud Examination Issues - Assignment Example

Fraud Examination Assignment: Short Cases and Case Studies Student’s Name Institution Fraud Examination Assignment: Short Cases and Case Studies Chapter 2: Short Case 1 Question 1 In this particular situation, Jefferson Retailers business need to choose extreme levels of engagement in relation to the processes involved with approval. This implies that all the senior staff at the firm, inclusive of the managers will be required to observe all the policies that deal with approval of credits of huge amounts while at the same time re-assessing the newer customers involved with the firm in an effective manner. Question 2 For the situation of ensuring the avoidance of happenings in the future whereby accountants are involved in the manipulation of bank accounts, it shall be prudent for the firm’s management function to separate the various functions. This will ensure the institution of a control system on performance that is not dependent on anything. An independent individual from a different section of the business should be charged with some of the firm’s processes such as duties concerning reconciliation of banking activities. Question 3 In a bid to lessen malpractices such as those perpetrated by Michael Meyer concerning inventory records manipulations, the firm’s management ought to campaign for different tasks and functions that relate to the storage of physical inventories and counting to be separated. In an instance where particular tasks and responsibilities are separated, it will be of good judgment to task separate people at any specific time to be in charge of physically handling inventories and record keeping tasks. Having such as system in operation will ensure minimal chance of inventory theft. Question 4 For the reason of lessening the possibilities of late shipment reports normally after shipments have been made, it will be considerate for the whole management of the firm as well as the senior staff to avail necessary documents and relevant records in considerable amounts. In retrospect, the firm’s department needs to come up with documents that are well updated. Updated documents will ensure handling is undertaken in an efficient and effective manner. Chapter 2: Case 4 Question 1 In this particular case opportunities perceived by Ruth Mishkin rely on a particular fact that the senior management of thecompany depends heavily on her services, as she is tasked with some essential responsibilities such as handling the management of cash, accounts balancing as well as the payment of the bills of the company. Such a degree of trust put on Mrs. Ruth may disposition the company to fraudulent activities. Question 2 In this specific case, because of her gambling activities, Ruth Mishkin may have beenpressured into fraudulent engagements. As a result of her gambling addiction, Ruth Mishkin resorted to committing fraud so as to have the necessary money for betting. Question 3 Due to the amount of trust that Rush Mishkin had from thecompany’s management in charge of her, such that she was charged with some very important company tasks like bank accounts balancing off, activities involving cash management handling as well as effecting company bills payments. It is evident from the responsibilities aforementioned that the company’s senior staff made the firm vulnerable to fraudulent activity by failing to separate the tasks of Ruth Mishkin. Question 4 Detrimental addictions like gambling activities, due to the regular nature of such activities, they normallypressurize those involved to get hold of more funds to feed the addiction. Therefore, with extreme pressure levels, even a small opportunity that presents itself to commit fraud is always taken. Chapter 2: Case Study 1 Question 1 A number of the opportunities to commit fraud in the Green Grass Business arise simply because only a single individual, who happens to be a friend of the business’owner, is in charge of operational responsibilities of the firm. The friend is tasked with the firm’s books of accounts balancing, routes scheduling for the other workers, looking after payments and also receipts of the firm’s books of account. Such evident failure to separate responsibilities may avail fraud opportunities. Question 2 The strongest signs that can be examined to denote possible activities of fraud include; firstly, expenses seems to have increased in a disproportionate manner while conversely the amount of revenues have experienced marginal increase in the current financial year. Secondly, the owner has observed a significant diminishing of his interactions with his accountant and operational manager, who is also his friend. Thirdly, another distinct sign of the possibility of activities of fraud is the lagging behind and reduced work rate of some employees in contrast to earlier years. Question 3 Some of the required steps that the company ought to implement in an effort to curb activities of fraud include; recruiting many workers who will be charged with duties of balancing accounts and receipts as well as payments. Such a measure will most definitelylead to a separation of tasks under a single individual. Most likely, this measure will lead to an increase in the wage expenses. Nevertheless, the measure will ensure that the company saves a lot of funds on a long term basis. Secondly, the firm’s owner can also commence training programs targeting the effects of fraudulent engagements to the current employees. Ample training will likely serve to improve productivity, but it will tag along with fraud trainer expert’s hiring costs. Chapter 3: Case 4 Question 1 In a bid to persuade the committee on the essential need of fraud detection trainings on the firm’s managements and employees, it shall be of prudence to indicate that those engaged in such activities as a whole are these two groups. Therefore, they will berequired to be trained so that they can identify with ease and accuracy any situation/activity related to fraud. Such a measure will definitely cut wastages of the company’s resources, since preventing fraudulent activities before they take place is much more advantageous. Question 2 A would advise the president to come up with an effective feedback and communication which will bring to the attention of employees involved in production on where they should report activities of fraud. The mechanism should be made more efficient through establishing extreme confidentiality levels for employees who report fraud to ensure future victimization does not take place. Furthermore, a reward system ought to be instituted by the firm as a means of encouragement of timely fraud reporting. Chapter 3: Case 10 In my opinion, I would not be in one accord with Kevin’s line of thinking as pertains to the process of recruitment for the firm. This owes to the fact that conducting employee background checks positively helps in determining past fraudulent activities of potential recruits. Though potential recruits have normally been considered to be very honest as well as hard working, such a view may be altogether false. In a situation whereby a firm recruits employees who are dishonest, the dishonest recruits may even change the thinking of honest workers, thereby multiplying the risks of fraudulent activities. In this rationale, recruiting such dishonest workers will definitely lead to fraudulent losses. Chapter 3: Case Study 1 Question 1 The pressures that Chris may have possibly faced that led him into perpetrating fraudulent acts may arise from his meager earning of $15 per hour for his schooling and family support. Because Jonathan trusted in him so much he was able to access phony credit numbers were the potential sources of opportunities to commit fraud. The reasons that Chris most probably relied on in committing his fraudulent activities lie in the sole fact that he was in charge of new employees training, as well as updating the members of his team on the tools he had come up with and newer processes. Such an opportunity would provide the chance for Chris to fraudulently manipulate the firm’s activities. Evidently, a lack of separation of responsibilities improves the chances of committing fraud. Question 2 A number of likely signs that indicate involvement of fraud in this particular case include; firstly, the monitor used by Chris was positioned in such a way that co-employees would not be able to see what he was doing. Secondly, Chris was in possession of majority of the devices such as the play station, MP3 player and Palm Pilot. Thirdly, Chris lunch outings became much more frequent. Fourthly, for purposes of his testing activities, Chris used to use multiple phony passwords as well as fake usernames. Question 3 Jonathan ought to have had a separation of responsibilities such that Chris would be in charge of a particular task such as updating members of the team with recent technology developments while another individual be charged with the training of new workers. Jonathan could have further put in rules to govern credit cards use, as it was through this channel that Chris committed fraud. Chapter 4: Case 5 It is possible to prove that the clienthas internal processes issues, some of which include processes of credit memorandum that are slower. Such slower processes have the potential of interfering with the validity of the internal processes at play.It is quite observable that the CFO of TCC Corp is quite intimidating and that the credit department of the firm experiences high rates of turnover. Such circumstances definitely lead to a work environment full of pressure. Also due to the fact that the firm’s CFO and the present manager in charge of credit have previously worked together, there is increased potential for collusion by the two to commit fraud. Question 2 The major issues that could have allowed the fraudulent activities to take place have a closereaction to aspects of ethics, competencies as well as issues of integrity. For example, in case integrity and competence would have been observed by the Chief Financial Officer, then fraudulent activities would have been averted. Chapter 4: Case 6 Question 1 The greatest concerns about fraudulent activities that could be possibly perpetrated include; firstly, the couple has cash handling involvements, as well as involvements in bank deposits and receipts.Secondly, the couple has part-time personnel recruitment involvements and such involvements easily lead to conflictual interests in recruiting relatives and family members. Question 2 As pertains to handling of cash issues, bank cash deposits and receipts, it would be prudent that other workers be charged with bank money deposits. Such a measure would avail the opportunity to carry out independent checks. Secondly, as pertains to the issue of who has the responsibility of hiring, the firm owner can charge himself with part-time employee hiring and supervise them directly. In this vein, the company ought to segregate tasks and duties as a policyso that employee performance independent checks can be carried out. Chapter 4: Case Study 1 The fraudulent activities in this particular case could have been averted if the dishonest employee would have been subjected to intense background checks. Moreover, had fraud detection programs been availed to the employees, and then the fraudulent activities would have been rendered impossible.The fraudulent activities were being perpetrated by highly trusted employees of the company who understand the firm’s operations and processes; as such it was very difficult to curb the fraud. Chapter 5: Short Cases 1 Question 1 The company’s sectors that have a huge fraud risk possibilities are those where there is no evident separation of responsibilities and tasks, for instance Cal Smith was the sole individual charged with money deposits at the bank and receipt processing. Question 2 The potential signs of Cal’s fraudulent activities include the fact that he normally complains of being overworked and underpaid, he has always been at work without fail and he seems to be getting adequate sleep time. Furthermore, many of the doughnuts being backed are done away with owing to over baking. Moreover, Cal, despite his underpayment claims, has been able to purchase his dream car. Question 3 Firstly, it will be prudent for the business owner to encourage night time shifts for all the employees. Secondly, it will be a good measure to improve the pay given to Cal Smith, to ensure he feels appreciated. Thirdly, the deposition of cash at the bank should not be tasked on Cal Smith. Chapter 5: Case Study 2 Question 1 First, Jones, though working for a company targeting the production of low cost software’s, he was able to command bank balances with very exorbitant figures. Secondly, Jones currently owns yachts, a number of cars as well as other luxuries. Thirdly, Jones is currently an outgoing and transformed character since he has become a member of a rotary club. Question 2 This particular scenario is likely to result in a positive outcome because the use of intense control check have been observed to provide accurate detection and curbing of activities that are fraudulent in nature. That there exists a lack of separation of responsibilities implies beneficial tidings to the firm by curbing losses arising from overspending. Question 3 For this specific scenario, the pressures thought to be influencing Jones are his apparent need to amass substantial amounts of wealth, an endeavor that rhymes with his plan of changing countries from Germany to the U.S. that the company never provide regulations for the value costs of under $1000 orders provided the ample opportunity for Jones to be able to order extensively for below value orders due to increased ease of approval. Question 4 The company has been able to relieve Jones of his responsibilities and tasks. Such a measure will act as ample deterrent to cultures of dishonesty that may be prevailing among current employees, thereby helping the company to save on wastages and fraud of its resources. The company ought to resort on training programs provisions pertaining to fraud reporting and detection for the current bunch of employees. Read More