Fraud Examination
5th Edition
ISBN: 9781305079144
Author: W. Steve Albrecht, Chad O. Albrecht, Conan C. Albrecht, Mark F. Zimbelman
Publisher: Cengage Learning
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Chapter 4, Problem 1SC
To determine
The policies and procedures that should be implemented to prevent and detect fraud.
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Sarah, a friend of yours, recently started her own business, The Bike and Boulder Company (B&B). B&B specializes in the sales of mountain bikes and rock climbing equipment. Sarah is putting the finishing touches on her company policies and procedures. She knows you are taking a fraud class and asks you to review what she has completed thus far. You quickly notice that Sarah has neglected to address fraud and fraud prevention in her policies and procedures.
What policies and procedures would you suggest Sarah implement to prevent and detect fraud at B&B?
Case 1: Fraud examination
Karen, a friend of yours, recently started her own business, The Bike and Boulder
Company (B&B). B&B specializes in the sales of mountain bikes and rock- climbing
equipment. Karen is putting the finishing touches on her company policies and
procedures. She knows you are taking a fraud class and asks you to review what
she has completed thus far. You quickly notice that Karen has neglected to address
fraud and fraud prevention in her policies and procedure. What policies and
procedures would you suggest Karen implement to prevent and detect fraud at B&B?
Case 1: Fraud examination
Karen, a friend of yours, recently started her own busi- ness, The Bike and Boulder Company (B&B). B&B specializes in the sales of mountain bikes and rock- climbing equipment. Karen is putting the finishing touches on her company policies and procedures. She knows you are taking a fraud class and asks you to review what she has completed thus far. You quickly notice that Karen has neglected to address fraud and fraud prevention in her policies and proce- dures. What policies and procedures would you suggest Karen implement to prevent and detect fraud at B&B?
Chapter 4 Solutions
Fraud Examination
Ch. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Prob. 3DQCh. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - Why is it important to inform outside vendors of...Ch. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Prob. 10DQ
Ch. 4 - Prob. 11DQCh. 4 - Prob. 12DQCh. 4 - Prob. 1TFCh. 4 - Prob. 2TFCh. 4 - Prob. 3TFCh. 4 - Prob. 4TFCh. 4 - Prob. 5TFCh. 4 - Prob. 6TFCh. 4 - Prob. 7TFCh. 4 - Prob. 8TFCh. 4 - Prob. 9TFCh. 4 - Prob. 10TFCh. 4 - Prob. 11TFCh. 4 - Prob. 12TFCh. 4 - Creating an expectation of punishment causes firm...Ch. 4 - 1. People will often be dishonest if they are...Ch. 4 - Prob. 2MCQCh. 4 - Prob. 3MCQCh. 4 - Prob. 4MCQCh. 4 - Prob. 5MCQCh. 4 - Prob. 6MCQCh. 4 - Prob. 7MCQCh. 4 - Prob. 8MCQCh. 4 - Prob. 9MCQCh. 4 - Prob. 10MCQCh. 4 - Prob. 11MCQCh. 4 - Prob. 12MCQCh. 4 - Prob. 13MCQCh. 4 - Prob. 1SCCh. 4 - Prob. 2SCCh. 4 - Prob. 3SCCh. 4 - Prob. 4SCCh. 4 - Case 5 While performing an audit of TCC...Ch. 4 - Prob. 6SCCh. 4 - Prob. 7SCCh. 4 - Prob. 8SCCh. 4 - Prob. 9SCCh. 4 - Prob. 10SCCh. 4 - Prob. 11SCCh. 4 - Prob. 12SCCh. 4 - Prob. 13SCCh. 4 - Prob. 14SC
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- CASE: You are a fraud expert and have been asked to investigate possible wrongdoing at a local nonprofit organization. You suspect that one of the workers, Stacey, has been embezzling money. After securing enough evidence to be very confident of Stacey's guilt, you speak with the president of the organization, Jamie. Jamie assures you that Stacey could be doing nothing wrong, that she has known Stacey for years, and Stacey is a good person. Further, she indicates that because of her relationship with Stacey, even if something were going wrong, no action would be taken with respect to the potential fraud. QUESTIONS: 1)How do you respond to Jamie? How do you explain to her what is at stake? 2) What monitoring and control systems should have been in place at Jamie's organization to prevent such a behavior? Explain. 3)Would you recommend an ethics audit to this company? Why?arrow_forwardConsider each of the following situations. Is there a potential problem? Which part of the fraud triangle is involved, if any? A. Susan is an accounts payable clerk. She sets up creditors in a financial database and pays invoices as they come in. Last year, she won employee of the year and is a valued employee. Through the grapevine, Susan's boss just learned that Susan's brother has a gambling problem. B. Now suppose that Susan from situation A is now secretary for the head of the marketing department. She keeps track of the vice president of marketing's schedule and handles the correspondence. C. Keith has been employed for 6 months as a teller at a community bank. All is going well, and his cash drawer has had shortages only twice (of less than P500). The shortages were traced and the problems corrected. D. At the company Memorial Day picnic and golf outing last week, Nancy noticed that June moved her ball to a better lie when she thought no one was looking. There…arrow_forwardGladys is in charge of receiving all customer payments, recording the payments, and depositing them at the bank. What element of the fraud triangle is best described here? Group of answer choices Opportunity Rationalization Incentive/Pressure Attribution Gladys has large amounts of student loan debt and a crippling gambling habit. She works part-time job in another city. What element of the fraud triangle is best described here? Group of answer choices Opportunity Fraudy fraud Pressure/incentive Rationalizationarrow_forward
- Item A. Fraud Facts: Susan Green has worked for ABC Company (“ABC”) as the executive secretary in the administrative department for over 10 years. Her apparent integrity and dedication to her work has earned her the reputation of being an outstanding employee and has resulted in increased responsibilities. Her present responsibilities include making arrangements for outside feasibility studies, maintaining client files, working with outside marketing consultants, initiating the payment process, and notifying the accounting department of all openings or closings of vendor accounts. During Susan’s first five years of employment, ABC subcontracted all of its feasibility and marketing studies through Adams and Co. This relationship was subsequently terminated because Adams and Co. merged with a larger, more expensive consulting group. After termination of Adams and Co., Susan and her supervisor selected a new firm to conduct ABC’s market research. However, Susan never informed the…arrow_forwardResearch consistently shows that there are three elements present when most frauds occur. List these elements and at least three related fraud factors that may exist for each and briefly explain each. Hannah Montana is interviewing with public accounting firms to become an auditor. Hannah does not believe that fraud is a "big deal" in client organizations and argues that most individuals in management of companies are "honest people". She believes that auditors are becoming too cynical. Describe your response to Hannah's attitude and discuss the major types of fraud that occur in companies. The auditor assesses the identified fraud risks after taking into account an evaluation of the client’s programs and controls. How might the auditor respond to the results of the assessment of higher fraud risk? Discuss the auditor’s responsibility to communicate fraud to the audit committee. When is the auditor required to communicate possible fraud to parties other than the audit committee and…arrow_forwardif a manager is incharge of the Credit Right Software Corp department which involves sells leading account sooftare product and two of his employess commited fraud. How should the manager prepare himself to understand what causes individuals to commit fraud and how it happens?arrow_forward
- Fraud refers to any intentional act to achieve gain, usually monetary. Committing a fraud isunethical and resulting in bad consequences, not just to the perpetrator, but also others (e.g.shareholders, workers etc.). Several example of fraud scenario are listed as follows:i). Store manager misused company’s car for personal purpose because he is the onlyperson that monitor the movement and usage of the car.ii). The accountant and the store keeper of AAA Enterprise co-operate in stealing thecompany’s inventory and they gain a lot of money from it.iii). The Chief Financial officer (CFO) of ABC Sdn Bhd had reported over $700,000 fakeearnings because he wants to achieve sales target.iv). XYZ Sdn Bhd booked revenues earlier than it should have because it was at risk ofmissing analyst estimates.Required;a. Identify the type of fraud committed in the scenario i). to iv). b. Based on the fraud triangle (i.e. pressure, opportunity and rationalization), identify thecause of fraud happen in the…arrow_forwardCharles Hart, an accounts payable clerk, is an hourly employee. He never works a minute past 5 P.M. unless the overtime has been approved. Charles has recently found himself faced with some severe financial difficulties. He has been accessing the system from his home during the evening and setting up an embezzlement scheme. As his boss, what control technique(s) discussed in lectures network risks and auditing could you use to help detect this type of fraud?arrow_forward1. How do you understand Fraud in your own words? Please provide explanation. 2. How do you understand the Fraud Triangle? Please provide explanation. 3. Favorite topic in Forensic Accounting? 4. What recommendations will you give to prevent fraud? 5. Will you consider becoming a Fraud investigator in the Future? Why or why not.arrow_forward
- 1. FRAUD SCHEME HEALTH INSPECTOR A city health inspector threatens to close down a restau- rant by issuing a fake health violation notice if the owner does not make a financial payment to the inspector. If the restaurant owner does not cooperate, he will not be able to open for business and the publicity will drive away his customers permanently. Faced with a threat of economic loss, the owner makes the payment. Required What type of fraud is this, and what controls can be implemented to prevent or detect the fraud?arrow_forwardIn the Why It Matters feature “Examples of Theft and FinancialReporting Frauds” at the beginning of the chapter, we introduced youto the Koss Corporation fraud. In this problem, we provide you withfurther details about that fraud. During the fall of 2009, Koss Corporation,a Wisconsin-based manufacturer of stereo headphone equipment,revealed that its vice president of finance (Sujata “Sue” Sachdeva) haddefrauded the company of approximately $31 million over a periodof at least five years. Grant Thornton LLP was the company’s auditor,and the firm issued unqualified audit opinions for the entire period in which they worked for Koss. According to reports, Sachdeva’s theftaccelerated over a period of years as follows:FY 2005 $2,195,477FY 2006 $2,227,669FY 2007 $3,160,310FY 2008 $5,040,968FY 2009 $8,485,937Q1 FY 2010 $5,326,305Q2 FY 2010 $4,917,005To give you a sense of the magnitude of the fraud, annual revenuesfor Koss Corporation are in the range of $40 to $45 million…arrow_forwardRohini works as an accountant with PQR Ltd. She embezzled $20,000 from the company bank account. She was caught in the annual audit of the company. She justified her action saying that her employer has not given any pay rise, so she had to take $20,000 from the account. Explain in your own words the internal control that may have failed in the above situation. Also explain which element of the fraud triangle Rohini is referring to justify her action.arrow_forward
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