Corporate Lobbying and Fraud Detection - Case Study 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 For this case, Jefferson Retailers should opt to engage in intense levels of approval processes. This means that all managers and all other senior staff will have to adhere to all policies of approval for large amounts of credits as well as re-evaluate newer business customers effectively (Chiu, Ku, Lie, & Chen, 2011). Question 2 For the case of avoiding future occurrences of accountants manipulating banks accounts, it will be fair for the management to effectively separate the different responsibilities of the firm so that an independent control on performance is effectively instituted. Such process as bank reconciliation duties should be tasked with an independent person preferably from another section of the firm (Chiu, Ku, Lie, & Chen, 2011). Question 3 In order to curtail vices like those promulgated by Michael Meyer in regards to manipulating inventory records, the management should advocate for the separation of the different duties that come up with counting and storing physical inventories. Whenever there is separation of duties, it will be fair that separate individuals are tasked with the responsibility of record keeping and physical handling of inventories at any particular point in time. Having this mechanism put in place, there will be little chance to steal inventories (Chiu, Ku, Lie, & Chen, 2011). Question 4 For purposes of reducing chances attributed to receiving reports later after shipments have already been conducted, it will be fair for the entire senior staff and management to provide substantial amounts of documents and other necessary records for that matter. Retrospectively, the department should formulate up-to-date documents that will allow necessary handling in an effective and efficient way (Chiu, Ku, Lie, & Chen, 2011). Chapter 2: Case 4 Question 1 For this case, Ruth Mishkin perceived opportunities rest with the fact that for one, she knows that the company’s top management entrusts her so much and thus, entitled with the activities of paying company’s bills, balancing necessary accounts and also, handling cash management activities. This level of trust impacted on her might put the company in a vulnerable position in regards to fraud. Question 2 For this case, the perceived pressure that might have made Ruth Mishkin to engage in fraud arose out of the fact that she was an active gambler. Thus, her addiction for gambling meant that she was to engage in fraud in order to access enough funds for gambling. Question 3 Given that Mishkin had been trusted so much by her immediate bosses, she was tasked with such duties as paying necessary company bills, balancing-off bank accounts and also, she was put in charge of handling cash management activities of the firm. It can be seen from the above tasks that the management failed to separate duties hence putting the company in a vulnerable position for exposure to fraud. Question 4 Such addictions as engaging gambling translate to a lot of pressure on the part of the participant to have more funds for which to gamble on a regular basis. Thus, with intense levels of pressure, it is possible that little reasons might trigger opportunities for these addicts to engage in fraudulent activities. Chapter 2: Case Study 1 Question 1 Some of the perceived fraud opportunities within the Green Grass business rests with the fact that only person, the owner’s friend, is tasked with all duties of operations within the firm. He is made in charge of scheduling routes for all the employees and also, he is responsible for conducting payments, receipts and balancing-off the company’s books of accounts. This clear lack of separation of duties might present an opportunity to engage in fraud (Chiu, Ku, Lie, & Chen, 2011). Question 2 The most formidable symptoms that can be established for this case so as to believe possible engagement in fraudulent activities include; first, there is marginal increases in the amount of revenues while on the other hand, expenses occurs to have increased disproportionately within the current financial year. Second, the owner has noticed that his interaction with his friend who also happens to be operational manager and accountant has decreased substantially over the years. Third, the fact that employees tend to have lagged behind in finishing their chores later in the day in comparison to other previous years is a distinctive symptom for possible fraudulent activities. Question 3 The necessary steps the company should emulate in order to ensure no fraud can exist include; first, employing numerous employees that will tasked with responsibility of payments, receipts and balancing accounts. This is likely to separate duties that are currently executed by a single person. The likely cost of this retribution is increased expenses in respect to wages. However, it will save the company lots of money in the long-term if it is well-implemented. Second, the owner can also set to train the existing employees on the effects of engaging in fraud. Effective training will likely increase production however, the company might be forced to incur costs attributed to the hiring of fraud expert to conduct the training. Chapter 3: Case 4 Question 1 In order to convince the committee on why it would be crucial for the employees and management to undergo fraud detection trainings, it will be fair to postulate that these groups are the ones engaged in the activity as a whole (Ajah & Inyiama, 2011). Thus, they have to undergo the training in order to be equipped with the skills necessary for recognizing any possible fraud-related activities (Ajah & Inyiama, 2011). This activity will likely save the company lots of resources since frauds will be prevented earlier enough before causing immense losses. Question 2 I would tell the president to formulate an effective communication and feedback mechanism that will alert all employees and others who are engaged in the production process on where to report element of fraud. It should be made effective by allowing for intense levels of confidentiality in regards to the information put forward by the employees so that they cannot be victimized later. A reward system should also be availed to the employees in order to encourage them to report suspected fraud on time. Chapter 3: Case 10 Personally, I would not at any point in time agree with Kevin’s way of thinking in regards to the way recruitment should be made. This is because a background check on a potential employee is positive especially in the course of determining whether they had been engaged in past frauds (Caplan, 1999). Potential employees have always been perceived as being hard-working individual with intense levels of honesty while this perception might be deceiving altogether (Caplan, 1999). In the event that dishonest employees are hired, they might likely influence honest workers into dishonesty activities thus catapulting fraudulent activities. Following this reasoning, there will potential loss of fraud in case these dishonest people are hired. Chapter 3: Case Study 1 Question 1 The possible pressures that Chris encountered in order to commit fraud rest with the fact that he earned $15 per hour that he would use to support his family as well as put himself through school. The potential opportunities for him to commit fraud lies with the fact he was trusted by Jonathan so much that we allowed access to phony credit number. The potential rationalizations that Chris could use to commit fraud rests with the fact that he was tasked with the responsibility of training new employees and also, updating team members on newer processes and tools that he had created. This could present an opportunity for him to manipulate processes for his fraudulent dealings (Caplan, 1999). Clearly, there is no separation of duties that further enhances opportunities for fraud. Question 2 Some of the possible symptoms that there could be fraud involved within this case include; first, Chris monitor had been repositioned so that his screen could not be viewed by other co-workers. Second, he had possessed almost all technological devices that include new Palm Pilot, MP3 player and play station. Third, he was going to lunch more than before. Fourth, he frequently used multiple fake usernames and passwords for testing activities. Question 3 Jonathan could have separated duties tasked with Chris so that one person was to train new employees while another was to update the team members with newer technological advancements. He could also have regulated the credit number so that fake usernames and passwords as used by Chris. This presented an opportunity for him to engage in fraud. Chapter 4: Case 5 Question 1 It can be ascertained that the client has issues with internal processes that included slower credit memorandum processing, which has the possibility of endangering the validity of the aforementioned processes. It is noticeable that TCC Corp has an intimidating CFO as well as higher turnover rates within the credit department. This is likely to cause a pressurized working environment. Given that the current credit manager and the CFO had worked together before, there is the possibility that they can collude in a fraudulent activity (Sabau, 2012). Question 2 The main problem that might have propelled the fraud to occur is related to such factors as integrity and competence as well as ethic aspects (Sabau, 2012). For instance, in the event that the Chief Financial Officer had constantly practiced integrity and competence then there would have been no fraud. Chapter 4: Case 6 Question 1 The biggest concerns for possible fraud include; first, the couple is involved with the handling of cash as well as receipts and deposits at the bank. Second, the couple is involved with hiring part-time personnel and this could lead to collusion in hiring family relatives. Question 2 In regards to the concern of handling cash, receipts and cash deposits to the bank, it will be fair that other employees be tasked with the depositing of the money to the banks in a routine. This would create room for conducting independent checks. Second, in regards to the issue concerned with hiring responsibility the owner can assume this responsibility of hiring part-time personnel and have them report to him directly. Therefore, the main policy the company should adopt is segregation of duties in order to allow for independent checks on employee performances. Chapter 4: Case Study 1 This fraud could have been prevented if background checks were done on the crooked employee prior to his employment. Also, in the case that the employees had been exposed to fraud detection training then it would have been impossible for them to engage in the vice altogether. The fraud was hard to prevent because it was being executed by one of the trusted employees of the firm who had the grasp of all the process and so it was possible to collude effectively ( Tae, Hyung & Jae, 2013). Chapter 5: Short Cases 1 Question 1 The possible areas of the business that are at risk are that there is no separation of duties since the process receipts and depositing money at the bank were done by one individual: Cal Smith (Tušek & Klikovac, 2012). Question 2 The possible symptoms include Cal not being able to get enough sleep, has never missed any day at work, complaints of being overworked and also, being underpaid. Also, most of the baked doughnuts are discarded due to over baking. Notwithstanding, Cal has bought a car of his dreams despite the underpaid claims. Question 3 First, it will be fair that the owner encourages other employees to take shift in working at nights. Second, pay Cal Smith more so that he does not feel unappreciated at all. Third, Cal should not be allowed to deposit cash to the bank. Chapter 5: Case Study 2 Question 1 First, he had an exorbitant bank balance despite working for a company whose aim was to sell software at low costs. Second, Jones had a bunch of cars, yachts and other treasures. Third, he joined the rotary club where he transformed to an outgoing and personable character. Question 2 The consequence for this scenario is likely to be positive in nature since intense control checks have been established to detect and prevent fraud related activities (Yu & Yu, 2011). The fact that there is separation of duties poses a benefit for reducing future possible losses due to overspending. Question 3 For this case, Jones perceived pressure rests with the fact that he needed to gain lots of wealth, which coincides with his mission and objective of relocating to the United States of America from Germany. The perceived opportunity for this case rests with the fact that company never regulated transactions on orders below of $1000 in value costs. Thus, Jones perceived this opportunity to order for extensive orders below this value for easier approval. Question 4 The company has let loose Jones from his duties in the company. This will prevent future dishonest cultures amongst existing employees thus save the company more resources altogether. The company should embark on providing training programs to the existing employees on matters related to fraud detection and reporting. References Ajah, I., & Inyiama, C. (2011). Loan Fraud Detection and IT-Based Combat Strategies. Journal of Internet Banking & Commerce, 16(2), 1-13. Abiola, I., & Oyewole, A. (2013). Internal control system on fraud detection: Nigeria experience. Journal of Accounting & Finance, 13(5), 137-148. Chiu, C., Ku, Y., Lie, T., & Chen, Y. (2011). Internet Auction Fraud Detection Using Social Network Analysis and Classification Tree Approaches. International Journal of Electronic Commerce, 15(3), 123-147. Caplan, D. (1999). Internal Controls and the Detection of Management Fraud. Journal of Accounting Research, 37(1), 101-117. Electronic Fraud Detection Improves. (2013). Journal of Accountancy, 216(3), 72. Sabau, A. (2012). Survey of Clustering based Financial Fraud Detection Research. Informatica Economica, 16(1), 110-122. Tae Kyung, K., Hyung Jin, L., & Jae Hoon, N. (2013). Analysis on Fraud Detection for Internet Service. International Journal of Security & Its Applications, 7(6), 275-284. Tušek, B., & Klikovac, A. (2012). Corporate governance practices in fraud prevention and detection - empirical evidence from Croatia. International Journal of Management Cases, 14(3), 59-71. Yu, F., & Yu, X. (2011). Corporate Lobbying and Fraud Detection. Journal of Financial & Quantitative Analysis, 46(6), 1865-1891. Read More