Accounting Question

REQUIRED:

[1 ] Given that the firm didn’t have any problem paying the higher bill, would Nathan’s planned course of action be ethical? Why or why not?

[2] What other courses of action might be available to Nathan? Which do you think would be the best action for him to take?

[3] Explain and apply the elements of the fraud triangle to this situation. Does Nathan seem to have the motivation, opportunity and or attitude to pocket the $75?

[4] As an auditor, what controls would you recommend to prevent or detect fraudulent reimbursement charges from being processed and/or paid?Instructions for Submitting Your Case Assignment on Canvas

Nathan Johnson’s
Rental Car Reimbursement
Should He Pocket the Cash?
Mark S. Beasley • Frank A. Buckless • Steven M. Glover • Douglas F. Prawitt
LEARNING OBJECTIVES
After completing and discussing this case you should be able to
[Il Understand ethical considerations that can arise
during recruiting and in practice
[2] Reason through alternative courses of action when
dealing with situations involving ethical questions
BACKGROUND
Nathan recently interviewed with one of the accounting firms in the city where he wants to live. The firm
agreed to cover the expense of a rental car that he used to travel from his university to the firm’s office.
The rental car agency required that Nathan pay for the car with his credit card. He would then have the
firm reimburse him for the expense. At the end of his trip, Nathan was supposed to pay the bill and then
send the receipt to the firm for reimbursement.
But as Nathan prepared to send in the receipt, he noticed that the car rental agency had overbilled his
credit card by $75. Nathan called the accounting firm to explain that his reimbursement request would
be delayed because he had been overbilled and he needed to straighten things out with the car
company. During his phone conversation with the human resource (HR) manager, Nathan told her he
would call the rental agency to have his bill corrected and then would send the firm a copy for
reimbursement when the revised bill arrived. The HR manager told Nathan not to bother correcting the
overbilling; she suggested that he simply send in the current receipt and the firm would reimburse him
for the entire amount. The HR manager was not concerned about paying the higher bill—
apparently it didn’t meet the firm’s “materiality threshold” in her eyes.
Before deciding whether to send in the incorrect bill for reimbursement, Nathan called the rental car
agency to see why he was overbilled. The agent was quite rude, essentially telling Nathan to “get lost.”
Now Nathan was determined to get the money back, and after several phone calls and
considerable hassle, the rental car company finally agreed to credit his card to correct the $75
overbilling. The credit will show up on Nathan’s next credit card statement.
The HR manager, however, has already told Nathan that the accounting firm would pay the higher
amount and requested that he just send the bill in for reimbursement. Nathan immediately realized he
could have the rental agency credit his card for the $75, but send the current receipt to the accounting
firm to get reimbursed for the amount he originally paid. Essentially he would walk away from the deal
with $75 in his pocket. Given the two or three hours he had spent fighting with the rental car company,
a little payback for his trouble didn’t sound too bad to Nathan.
REQUIRED:
[1 ] Given that the firm didn’t have any problem paying the higher bill, would Nathan’s
planned course of action be ethical? Why or why not?
[2] What other courses of action might be available to Nathan? Which do you think would be the
best action for him to take?
[3] Explain and apply the elements of the fraud triangle to this situation. Does Nathan seem to
have the motivation, opportunity and or attitude to pocket the $75?
[4] As an auditor, what controls would you recommend to prevent or detect fraudulent
reimbursement charges from being processed and/or paid?