USA: +1(669)289-8683 
Sign in
please follow all instructions and answer all questions
Practical Problem 1
You are K.C. Barton, a new auditor in the Internal Audit department of Jenkins
Manufacturing Company. Jenkins Manufacturing Company (JMC) has been in business for more
than forty years in central Texas and is a publicly traded company with ten subsidiaries. The
company manufactures parts for computers, having jumped into the computer business when it
was in its infancy back in the 60s. The Jenkins family still owns the majority stock of the
company. The company has 12,000 employees that are spread all over the United States,
Canada, Mexico, and Scotland in seven offices. The business has been solid for most of its forty
years, and although it has had slowdowns during recessions, there have been very few times
when the company had to lay off employees.
The company’s chairman of the board is James Jenkins, son of founder John Jenkins. The
Vice-Chairman of the Board is Jenny Jenkins Roberts, daughter of John Jenkins. Other senior
executives are not members of the Jenkins family, but have been with the company, on average,
20 years. The company prefers to promote from within and offers stock options to all employees
no matter what level they are.
In order to become familiar with the audits that are conducted by the department, you have
been reviewing working papers for previous audits. You note that two years ago, an audit was
conducted of the purchasing function of a small division of the company in which the purchasing
director, Thomas Brackens was extremely uncooperative. While that might be a fairly common
occurrence in audits, this audit was never completed. There is a notation in the file that the CEO
of the company asked the department to conduct another audit of an area that had been having
serious problems as soon as possible, which required all resources to be pulled to complete the
CEO’s request. The internal audit department had planned to finish the audit but never did. The
auditors who worked on the purchasing audit have since left the company as has the internal audit
manager. There were some notations that the auditors were having trouble locating some
invoices and requisitions that had been selected for audit and that there were some purchases that
looked like that had been split. A previous audit of the area was conducted without any major
findings noted. In fact, there is a memo in the file from Jim Miller, the former director of
purchasing (now retired) who thanked the internal audit for their assistance and that he would
implement their recommendations immediately.
You decide that it is time to look back into this situation. There are too many red flags that
say something isn’t right. You bring it up to your manager who says to go ahead and check it out,
but that if it’s going to take more than 100 hours, you would need to let her know.
Questions:
1.
What red flags do you see that are troublesome?
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 1
Revised: 05/05/04
Practical Problem 1
2.
What types of fraud could be occurring?
3.
How would you check out this situation?
4.
How would you approach Mr. Brackens?
5.
Develop an action plan.
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 2
Revised: 05/05/04
Practical Problem 2
You decide to conduct an audit of the purchasing function for this division. But before you
do, you decide to get some more information about the division and the employees. You find that
Mr. Brackens has been an employee for more than twenty-five years, coming to the company right
out of college. He has five employees that work for him, one is a manager (Angela Harkins) and
the rest are buyers — two senior buyers and three junior buyers. Harkins has been an employee
for 15 years and the buyers have been working in the department for six months to ten years: Jim
Rydel, Sr. Buyer (10 years); Ruth Bell, Senior Buyer (7 years); Ben Troupe, Junior Buyer (2
years); Rhonda Davidson, Junior Buyer (2 years); Rick Adams, Junior Buyer (6 months).
Regarding purchasing policies, any purchase that is more than $10,000 must go out for a bid.
All bids must be approved by the manager of the purchasing department or higher. Only
authorized vendors are allowed to bid. Vendors without a vendor number must be handled by
special processing and approved by the director.
Junior buyers can authorize purchases of up to $5,000; senior buyers, $7,000; managers and
directors, $9,000.
You pull a listing of vendors who have been paid more than $100,000 for the years, 2000.
2001, and 2002 and find the following.
JMC
Vendors with >$100,000 2000-2002
2000
2001
2002
Total
% of Total
Black IPS
47,844
12.09%
52,468
5.90%
0
0.00%
100,312
3.59%
Warehouse Eqpmt
30,402
7.68%
44,447
4.99%
70,940
4.69%
145,789
5.22%
Lantern Co
38,089
9.62%
78,682
8.84%
45,872
3.04%
162,643
5.83%
Oak Hill Distributors
61,166
15.46%
24,566
2.76%
78,229
5.18%
163,961
5.87%
Seros
37,090
9.37%
48,843
5.49%
119,068
7.88%
205,001
7.35%
Randazzo Supply
41,189
10.41%
62,012
6.97%
111,845
7.40%
215,046
7.71%
Adam Systems
50,470
12.75%
52,198
5.86%
140,033
9.27%
242,701
8.70%
AA Supply
67,194
16.98%
80,378
9.03%
113,723
7.53%
261,295
9.36%
Ad Sys
20,321
5.13%
78,019
8.77%
173,854
11.51%
272,194
9.75%
Top Q
0
0.00%
105,620
11.87%
247,172
16.36%
352,792
12.64%
Blues Pro
0
0.00%
260,785
29.30%
408,323
27.02%
669,108
23.98%
395,765 100.00%
890,019
100.00%
1,511,061
100.00%
2,790,842
100.00%
Questions:
1. Is there anything that is suspicious on the summary? Explain your answer.
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 3
Revised: 05/05/04
Practical Problem 2
2. Do you have predication for fraud? Why or why not?
3. Would you conduct a surprise audit of the area? Why or why not?
4. How would you approach the area?
5. What are your next steps?
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 4
Revised: 05/05/04
Practical Problem 3
You contact Mr. Brackens and inform him that you will be conducting an audit of his area and
it will begin tomorrow. You will be conducting an audit of the area to close out the audit that was
started a few years ago. You don’t expect to be in the area more than a few days at most, but
would appreciate his and his staff’s full cooperation. Mr. Brackens informs you that he and his
staff do not have time for you to come in until, at the minimum, 3 months from now. Needless to
say, after going back and forth between him and your boss, you make plans to conduct the audit
tomorrow. You pull a listing of invoices paid to the highest paid vendors. The list starts on the
next page.
Questions:
6.
After reviewing the detailed listings, do you have any suspicions? If so what are they?
7.
What are your next steps?
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 5
Revised: 05/05/04
Practical Problem 3
JMC
DATA FILE: PURCHASES
DATE RANGE: 01/01/01-12/31/02
SORT FIELD: Vendor Name/Date
VENDOR
DATE
VENDOR NAME
NUMBER
PURCHASING
INVOICE
AGENT
NUMBER
CHECK
6,307
NUMBER
4289
200003040
4,509
4334
200005005
13,502
4362
200007020
374
4397
200007045
9,526
4410
Rydel
200009021
5,224
4429
3282
Rydel
200010003
18,254
4444
3282
Rydel
200011056
4,198
4478
12/28/00 AA Supply
3282
Rydel
200012099
5,300
4499
01/08/01 AA Supply
3282
Rydel
200101010
7,143
4507
02/12/01 AA Supply
3282
Rydel
200102025
15,445
4522
03/19/01 AA Supply
3282
Rydel
200103035
555
4548
04/09/01 AA Supply
3282
Rydel
200104040
9,348
4561
05/07/01 AA Supply
3282
Rydel
200105015
7,477
4586
06/11/01 AA Supply
3282
Rydel
200106021
8,668
4613
08/13/01 AA Supply
3282
Rydel
200108027
6,286
4655
10/01/01 AA Supply
3282
Rydel
200110001
14,721
4684
11/05/01 AA Supply
3282
Rydel
200111015
937
4720
12/17/01 AA Supply
3282
Rydel
200112036
9,798
4759
01/02/02 AA Supply
3282
Rydel
200201004
8,873
4782
01/23/02 AA Supply
3282
Rydel
200201054
4,167
4803
02/03/02 AA Supply
3282
Rydel
200202006
3,009
4812
02/24/02 AA Supply
3282
Rydel
200202068
6,104
4826
03/20/02 AA Supply
3282
Rydel
200203045
16,875
4854
04/03/02 AA Supply
3282
Rydel
200204007
2,567
4858
04/28/02 AA Supply
3282
Rydel
200204085
2,775
4889
05/15/02 AA Supply
3282
Rydel
200205040
807
4899
06/02/02 AA Supply
3282
Rydel
200206003
743
4918
06/30/02 AA Supply
3282
Rydel
200206059
12,224
4961
07/09/02 AA Supply
3282
Rydel
200207010
659
4969
07/25/02 AA Supply
3282
Rydel
200207098
9,687
4992
08/25/02 AA Supply
3282
Rydel
200208069
7,477
5023
09/18/02 AA Supply
3282
Rydel
200209027
8,997
5039
10/23/02 AA Supply
3282
Rydel
200210058
9,526
5088
11/13/02 AA Supply
3282
Rydel
200211045
4,455
5119
12/23/02 AA Supply
3282
Rydel
200212058
14,778
261,295
5169
01/06/00 AA Supply
3282
Rydel
200001001
03/06/00 AA Supply
3282
Rydel
05/08/00 AA Supply
3282
Rydel
07/10/00 AA Supply
3282
Rydel
07/23/00 AA Supply
3282
Rydel
09/11/00 AA Supply
3282
10/02/00 AA Supply
11/20/00 AA Supply
AMOUNT
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 6
Revised: 05/05/04
Practical Problem 3
01/06/00 Ad Sys
8999
00-050
857
4287
03/16/00 Ad Sys
8999
00-102
1,883
4341
05/15/00 Ad Sys
8999
00-175
3,866
4370
07/17/00 Ad Sys
8999
00-257
5,444
4406
08/07/00 Ad Sys
8999
00-358
2,587
4416
10/16/00 Ad Sys
8999
00-598
2,554
4453
12/04/00 Ad Sys
8999
00-702
3,130
4491
02/12/01 Ad Sys
8999
01-075
9,190
4523
04/30/01 Ad Sys
8999
01-145
6,797
4580
06/18/01 Ad Sys
8999
01-279
14,728
4620
07/30/01 Ad Sys
8999
01-324
9,585
4648
09/13/01 Ad Sys
8999
01-477
4,278
4673
10/18/01 Ad Sys
8999
01-524
11,584
4705
12/03/01 Ad Sys
8999
01-604
14,999
4743
12/27/01 Ad Sys
8999
01-641
6,858
4772
03/14/02 Ad Sys
8999
02-078
4,047
4852
04/25/02 Ad Sys
8999
02-195
13,584
4884
05/30/02 Ad Sys
8999
02-225
8,956
4911
06/13/02 Ad Sys
8999
02-245
12,578
4920
07/08/02 Ad Sys
8999
02-314
14,859
4963
07/25/02 Ad Sys
8999
02-375
13,587
4990
08/08/02 Ad Sys
8999
02-401
9,914
5002
08/26/02 Ad Sys
8999
02-436
5,874
5024
09/09/02 Ad Sys
8999
02-442
18,587
5029
09/26/02 Ad Sys
8999
02-486
9,789
5051
09/26/02 Ad Sys
8999
02-487
6,288
5052
10/03/02 Ad Sys
8999
02-495
14,778
5072
10/21/02 Ad Sys
8999
02-504
9,585
5078
10/24/02 Ad Sys
8999
02-507
4,250
5089
11/04/02 Ad Sys
8999
02-581
12,548
5106
12/12/02 Ad Sys
8999
02-602
8,758
5162
12/26/02 Ad Sys
8999
02-645
5,872
5175
272,194
01/13/00 Adam Systems
6803 Troupe
1524
7,225
4297
01/18/00 Adam Systems
6803 Troupe
1535
4,919
4300
02/22/00 Adam Systems
6803 Troupe
1578
7,487
4328
04/24/00 Adam Systems
6803 Troupe
1775
1,876
4358
05/25/00 Adam Systems
6803 Troupe
1815
2,470
4372
06/19/00 Adam Systems
6803 Troupe
1866
8,735
4388
07/17/00 Adam Systems
6803 Troupe
1898
1,803
4404
09/25/00 Adam Systems
6803 Troupe
1977
3,215
4436
10/23/00 Adam Systems
6803 Troupe
2014
7,418
4459
12/07/00 Adam Systems
6803 Troupe
2145
5,322
4492
02/05/01 Adam Systems
6803 Troupe
2655
2,577
4520
03/05/01 Adam Systems
6803 Troupe
2685
1,121
4535
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 7
Revised: 05/05/04
Practical Problem 3
06/25/01 Adam Systems
6803 Troupe
3102
366
4627
07/30/01 Adam Systems
6803 Troupe
3178
2,207
4646
08/20/01 Adam Systems
6803 Troupe
3222
1,705
4661
09/24/01 Adam Systems
6803 Troupe
3285
2,426
4680
10/11/01 Adam Systems
6803 Troupe
3304
7,715
4700
11/12/01 Adam Systems
6803 Troupe
3345
6,161
4727
11/29/01 Adam Systems
6803 Troupe
3375
5,479
4739
12/03/01 Adam Systems
6803 Troupe
3387
9,745
4742
12/13/01 Adam Systems
6803 Troupe
3394
9,187
4751
12/27/01 Adam Systems
6803 Troupe
3425
3,509
4770
01/03/02 Adam Systems
6803 Troupe
3466
7,388
4783
01/22/02 Adam Systems
6803 Troupe
3489
436
4801
02/04/02 Adam Systems
6803 Troupe
3524
2,739
4813
02/14/02 Adam Systems
6803 Troupe
3566
6,751
4818
03/11/02 Adam Systems
6803 Troupe
3604
1,197
4839
03/28/02 Adam Systems
6803 Troupe
3689
3,085
4855
04/04/02 Adam Systems
6803 Troupe
3694
7,317
4862
04/25/02 Adam Systems
6803 Troupe
3726
6,480
4882
05/16/02 Adam Systems
6803 Troupe
3764
1,629
4900
05/23/02 Adam Systems
6803 Troupe
3789
1,801
4909
06/20/02 Adam Systems
6803 Troupe
3824
6,088
4933
06/20/02 Adam Systems
6803 Troupe
3825
1,668
4934
06/24/02 Adam Systems
6803 Troupe
3830
8,772
4937
07/01/02 Adam Systems
6803 Troupe
3846
5,531
4962
07/08/02 Adam Systems
6803 Troupe
3877
5,703
4964
08/05/02 Adam Systems
6803 Troupe
3897
7,696
4997
08/19/02 Adam Systems
6803 Troupe
3920
6,948
5013
09/19/02 Adam Systems
6803 Troupe
3945
1,011
5040
09/23/02 Adam Systems
6803 Troupe
3956
785
5049
09/26/02 Adam Systems
6803 Troupe
3968
2,077
5053
09/30/02 Adam Systems
6803 Troupe
3971
2,547
5069
10/03/02 Adam Systems
6803 Troupe
3998
2,426
5075
10/03/02 Adam Systems
6803 Troupe
3999
7,877
5076
10/24/02 Adam Systems
6803 Troupe
4088
6,060
5090
10/24/02 Adam Systems
6803 Troupe
4089
5,488
5091
10/24/02 Adam Systems
6803 Troupe
4090
8,777
5092
10/28/02 Adam Systems
6803 Troupe
4097
9,187
5098
11/04/02 Adam Systems
6803 Troupe
4125
3,699
5107
11/18/02 Adam Systems
6803 Troupe
4186
7,415
5122
12/23/02 Adam Systems
6803 Troupe
4220
1,455
5170
242,701
01/10/00 Black IPS
1432 Harkins
011000040
7,080
4290
02/03/00 Black IPS
1432 Harkins
020300005
4,178
4315
02/03/00 Black IPS
1432 Harkins
020300006
9,298
4316
03/20/00 Black IPS
1432 Harkins
032000045
2,872
4342
04/27/00 Black IPS
1432 Harkins
042700088
2,521
4359
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 8
Revised: 05/05/04
Practical Problem 3
06/12/00 Black IPS
1432 Harkins
061200040
4,664
4381
07/13/00 Black IPS
1432 Harkins
071300046
4,014
4399
08/14/00 Black IPS
1432 Harkins
081400042
4,276
4417
09/28/00 Black IPS
1432 Harkins
092800102
1,013
4437
10/16/00 Black IPS
1432 Harkins
101600033
3,655
4452
11/30/00 Black IPS
1432 Harkins
113000188
4,273
4486
12/14/00 Black IPS
1432 Harkins
121400044
1,286
4495
01/16/01 Black IPS
1432 Harkins
011601056
1,213
4512
02/15/01 Black IPS
1432 Harkins
021501066
1,003
4525
02/26/01 Black IPS
1432 Harkins
022601144
9,942
4530
03/12/01 Black IPS
1432 Harkins
031201036
3,372
4540
04/05/01 Black IPS
1432 Harkins
040501012
4,969
4557
04/16/01 Black IPS
1432 Harkins
041601052
7,317
4570
04/19/01 Black IPS
1432 Harkins
041901058
1,595
4571
04/30/01 Black IPS
1432 Harkins
043001198
4,706
4579
05/07/01 Black IPS
1432 Harkins
050701028
5,299
4585
05/10/01 Black IPS
1432 Harkins
051001048
2,136
4588
05/21/01 Black IPS
1432 Harkins
051001066
7,078
4599
05/24/01 Black IPS
1432 Harkins
052401087
1,097
4600
05/28/01 Black IPS
1432 Harkins
052801092
1,455
4606
100,312
04/08/01 Blues Pro
2460 Harkins
2001040
9,347
4559
04/15/01 Blues Pro
2460 Harkins
2001085
8,469
4568
04/22/01 Blues Pro
2460 Harkins
2001098
9,954
4572
05/03/01 Blues Pro
2460 Harkins
2001125
6,553
4581
05/14/01 Blues Pro
2460 Harkins
2001145
5,518
4592
05/16/01 Blues Pro
2460 Harkins
2001147
1,100
4594
05/17/01 Blues Pro
2460 Harkins
2001150
7,580
4596
05/24/01 Blues Pro
2460 Harkins
2001160
6,945
4601
05/27/01 Blues Pro
2460 Harkins
2001165
3,005
4605
06/07/01 Blues Pro
2460 Harkins
2001175
9,177
4612
06/17/01 Blues Pro
2460 Harkins
2001225
8,699
4619
06/25/01 Blues Pro
2460 Harkins
2002240
6,245
4626
07/23/01 Blues Pro
2460 Harkins
2001288
9,501
4640
07/23/01 Blues Pro
2460 Harkins
2001289
8,796
4641
08/16/01 Blues Pro
2460 Harkins
2001322
2,238
4656
09/13/01 Blues Pro
2460 Harkins
2001366
9,903
4671
09/13/01 Blues Pro
2460 Harkins
2001367
9,800
4672
09/27/01 Blues Pro
2460 Harkins
2001378
6,282
4683
10/04/01 Blues Pro
2460 Harkins
2001389
9,245
4690
10/04/01 Blues Pro
2460 Harkins
2001390
7,013
4691
10/04/01 Blues Pro
2460 Harkins
2001391
6,856
4692
10/05/01 Blues Pro
2460 Harkins
2001392
9,992
4694
10/26/01 Blues Pro
2460 Harkins
2001403
6,929
4713
10/28/01 Blues Pro
2460 Harkins
2001405
6,929
4714
11/18/01 Blues Pro
2460 Harkins
2001415
6,834
4731
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 9
Revised: 05/05/04
Practical Problem 3
12/02/01 Blues Pro
2460 Harkins
2001420
2,940
4741
12/09/01 Blues Pro
2460 Harkins
2001430
7,875
4749
12/09/01 Blues Pro
2460 Harkins
2001431
7,817
4750
12/14/01 Blues Pro
2460 Harkins
2001436
781
4754
12/14/01 Blues Pro
2460 Harkins
2001437
2,807
4755
12/14/01 Blues Pro
2460 Harkins
2001438
2,786
4756
12/20/01 Blues Pro
2460 Harkins
2001448
9,006
4761
12/20/01 Blues Pro
2460 Harkins
2001449
6,252
4762
12/28/01 Blues Pro
2460 Harkins
2001453
6,004
4775
12/28/01 Blues Pro
2460 Harkins
2001454
2,778
4776
12/30/01 Blues Pro
2460 Harkins
2001460
9,606
4778
12/30/01 Blues Pro
2460 Harkins
2001461
9,235
4779
12/30/01 Blues Pro
2460 Harkins
2001462
6,714
4780
12/30/01 Blues Pro
2460 Harkins
2001463
3,274
4781
01/08/02 Blues Pro
2460 Harkins
2002040
7,605
4789
01/15/02 Blues Pro
2460 Harkins
2002050
8,324
4795
01/22/02 Blues Pro
2460 Harkins
2002062
9,641
4802
01/29/02 Blues Pro
2460 Harkins
2002065
6,769
4805
02/17/02 Blues Pro
2460 Harkins
2002088
9,262
4824
02/26/02 Blues Pro
2460 Harkins
2002093
4,353
4831
03/03/02 Blues Pro
2460 Harkins
2002122
2,828
4836
03/10/02 Blues Pro
2460 Harkins
2002136
5,989
4838
03/28/02 Blues Pro
2460 Harkins
2002142
8,225
4856
04/07/02 Blues Pro
2460 Harkins
2002157
9,358
4863
04/15/02 Blues Pro
2460 Harkins
2002160
9,358
4878
04/29/02 Blues Pro
2460 Harkins
2002179
5,790
4893
05/13/02 Blues Pro
2460 Harkins
2002194
9,716
4897
05/21/02 Blues Pro
2460 Harkins
2002202
5,719
4903
05/27/02 Blues Pro
2460 Harkins
2002222
9,772
4910
06/02/02 Blues Pro
2460 Harkins
2002242
8,146
4912
06/02/02 Blues Pro
2460 Harkins
2002243
7,759
4913
06/02/02 Blues Pro
2460 Harkins
2002244
6,004
4914
06/18/02 Blues Pro
2460 Harkins
2002266
9,793
4928
06/18/02 Blues Pro
2460 Harkins
2002267
8,000
4929
06/18/02 Blues Pro
2460 Harkins
2002268
7,507
4932
06/25/02 Blues Pro
2460 Harkins
2002287
9,904
4938
06/25/02 Blues Pro
2460 Harkins
2002288
9,158
4939
06/25/02 Blues Pro
2460 Harkins
2002289
3,264
4940
06/25/02 Blues Pro
2460 Harkins
2002290
680
4941
07/15/02 Blues Pro
2460 Harkins
2002322
9,468
4972
07/15/02 Blues Pro
2460 Harkins
2002323
9,401
4973
07/15/02 Blues Pro
2460 Harkins
2002324
9,183
4974
07/29/02 Blues Pro
2460 Harkins
2002364
1,845
4994
09/09/02 Blues Pro
2460 Harkins
2002458
8,973
5030
09/13/02 Blues Pro
2460 Harkins
2002466
3,658
5033
09/20/02 Blues Pro
2460 Harkins
2002478
9,903
5045
09/20/02 Blues Pro
2460 Harkins
2002479
9,800
5046
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 10
Revised: 05/05/04
Practical Problem 3
09/27/02 Blues Pro
2460 Harkins
2002482
9,999
5056
09/27/02 Blues Pro
2460 Harkins
2002483
9,654
5060
09/27/02 Blues Pro
2460 Harkins
2002484
7,189
5061
09/27/02 Blues Pro
2460 Harkins
2002485
6,947
5062
09/30/02 Blues Pro
2460 Harkins
2002490
9,758
5070
10/21/02 Blues Pro
2460 Harkins
2002520
6,825
5080
10/21/02 Blues Pro
2460 Harkins
2002521
6,825
5081
10/28/02 Blues Pro
2460 Harkins
2002536
6,225
5101
11/04/02 Blues Pro
2460 Harkins
2002545
1,447
5108
11/18/02 Blues Pro
2460 Harkins
2002566
7,844
5125
11/18/02 Blues Pro
2460 Harkins
2002567
7,588
5126
12/02/02 Blues Pro
2460 Harkins
2002588
8,775
5138
12/02/02 Blues Pro
2460 Harkins
2002589
8,325
5140
12/02/02 Blues Pro
2460 Harkins
2002590
2,499
5150
12/19/02 Blues Pro
2460 Harkins
2002597
9,010
5166
12/19/02 Blues Pro
2460 Harkins
2002598
8,455
5167
12/26/02 Blues Pro
2460 Harkins
2002605
7,844
5176
12/26/02 Blues Pro
2460 Harkins
2002606
7,847
5177
12/30/02 Blues Pro
2460 Harkins
2002610
9,606
5183
12/30/02 Blues Pro
2460 Harkins
2002611
9,235
5184
12/30/02 Blues Pro
2460 Harkins
2002612
6,714
5185
12/30/02 Blues Pro
2460 Harkins
2002613
4,557
5186
669,108
01/10/00 Lantern Co
2365 Bell
145
1,258
4295
02/10/00 Lantern Co
2365 Bell
148
1,487
4318
05/01/00 Lantern Co
2365 Bell
151
1,358
4360
06/19/00 Lantern Co
2365 Bell
154
2,588
4387
08/07/00 Lantern Co
2365 Bell
157
4,857
4415
09/21/00 Lantern Co
2365 Bell
160
6,404
4435
10/16/00 Lantern Co
2365 Bell
165
6,608
4454
11/13/00 Lantern Co
2365 Bell
168
6,258
4475
12/07/00 Lantern Co
2365 Bell
170
7,271
4493
01/16/01 Lantern Co
2365 Bell
175
8,588
4513
02/08/01 Lantern Co
2365 Bell
178
7,289
4521
02/26/01 Lantern Co
2365 Bell
181
9,434
4531
04/22/01 Lantern Co
2365 Bell
186
9,603
4573
04/23/01 Lantern Co
2365 Bell
187
5,877
4574
06/25/01 Lantern Co
2365 Bell
190
6,577
4628
07/23/01 Lantern Co
2365 Bell
195
3,258
4639
08/27/01 Lantern Co
2365 Bell
197
5,488
4662
09/24/01 Lantern Co
2365 Bell
199
5,250
4681
11/12/01 Lantern Co
2365 Bell
202
7,715
4728
12/17/01 Lantern Co
2365 Bell
203
9,603
4760
01/24/02 Lantern Co
2365 Bell
205
2,588
4804
02/28/02 Lantern Co
2365 Bell
206
9,603
4835
06/17/02 Lantern Co
2365 Bell
210
8,248
4925
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 11
Revised: 05/05/04
Practical Problem 3
07/22/02 Lantern Co
2365 Bell
212
7,415
4987
09/26/02 Lantern Co
2365 Bell
216
4,472
5055
10/28/02 Lantern Co
2365 Bell
218
4,115
5102
11/21/02 Lantern Co
2365 Bell
221
6,577
5129
12/30/02 Lantern Co
2365 Bell
224
2,854
5178
162,643
01/24/00 Oak Hill Distributors
1567 Harkins
0001020
6,084
4302
02/14/00 Oak Hill Distributors
1567 Harkins
0002040
7,317
4325
03/06/00 Oak Hill Distributors
1567 Harkins
0003051
2,598
4335
04/13/00 Oak Hill Distributors
1567 Harkins
0004066
4,258
4350
05/11/00 Oak Hill Distributors
1567 Harkins
0005078
4,788
4369
06/05/00 Oak Hill Distributors
1567 Harkins
0006089
7,148
4378
07/10/00 Oak Hill Distributors
1567 Harkins
0007099
5,392
4398
08/14/00 Oak Hill Distributors
1567 Harkins
0008114
6,768
4418
09/28/00 Oak Hill Distributors
1567 Harkins
0009140
5,055
4438
10/30/00 Oak Hill Distributors
1567 Harkins
0010187
6,988
4461
11/27/00 Oak Hill Distributors
1567 Davidson
0011198
1,985
4485
12/11/00 Oak Hill Distributors
1567 Davidson
0012215
2,785
4494
01/16/01 Oak Hill Distributors
1567 Davidson
0101242
3,575
4514
02/12/01 Oak Hill Distributors
1567 Davidson
0102263
1,825
4524
03/22/01 Oak Hill Distributors
1567 Davidson
0103278
1,587
4550
05/07/01 Oak Hill Distributors
1567 Davidson
0105290
2,002
4587
06/04/01 Oak Hill Distributors
1567 Davidson
0106320
1,478
4610
06/25/01 Oak Hill Distributors
1567 Davidson
0106342
2,587
4628
07/26/01 Oak Hill Distributors
1567 Davidson
0107359
3,680
4645
10/25/01 Oak Hill Distributors
1567 Davidson
0110426
1,220
4712
11/29/01 Oak Hill Distributors
1567 Davidson
0111487
4,258
4740
12/13/01 Oak Hill Distributors
1567 Davidson
0112511
1,874
4753
12/27/01 Oak Hill Distributors
1567 Davidson
0112549
480
4773
01/17/02 Oak Hill Distributors
1567 Davidson
0201566
2,587
4796
02/18/02 Oak Hill Distributors
1567 Davidson
0202589
4,157
4825
03/18/02 Oak Hill Distributors
1567 Davidson
0203608
1,258
4853
04/25/02 Oak Hill Distributors
1567 Davidson
0204627
1,358
4883
05/23/02 Oak Hill Distributors
1567 Davidson
0205689
6,528
4908
06/24/02 Oak Hill Distributors
1567 Davidson
0206742
4,320
4935
07/22/02 Oak Hill Distributors
1567 Davidson
0207796
2,587
4986
08/05/02 Oak Hill Distributors
1567 Davidson
0208824
3,524
4998
09/18/02 Oak Hill Distributors
1567 Harkins
0209860
14,587
5037
09/18/02 Oak Hill Distributors
1567 Harkins
0209861
6,999
5038
09/20/02 Oak Hill Distributors
1567 Davidson
0209869
1,954
5047
10/03/02 Oak Hill Distributors
1567 Davidson
0210873
1,158
5071
10/21/02 Oak Hill Distributors
1567 Davidson
0210883
2,441
5079
10/24/02 Oak Hill Distributors
1567 Davidson
0210902
3,002
5093
10/24/02 Oak Hill Distributors
1567 Davidson
0210903
2,877
5094
10/31/02 Oak Hill Distributors
1567 Davidson
0210915
1,825
5104
11/04/02 Oak Hill Distributors
1567 Davidson
0211940
1,207
5105
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 12
Revised: 05/05/04
Practical Problem 3
11/04/02 Oak Hill Distributors
1567 Davidson
0211941
4,587
5115
11/14/02 Oak Hill Distributors
1567 Davidson
0211950
1,487
5121
11/25/02 Oak Hill Distributors
1567 Davidson
0111963
1,544
5137
12/05/02 Oak Hill Distributors
1567 Davidson
0112978
4,877
5160
12/16/02 Oak Hill Distributors
1567 Davidson
0112998
2,487
5165
12/30/02 Oak Hill Distributors
1567 Davidson
0212001
878
5181
163,961
01/13/00 Randazzo Supply
4485 Bell
15590
5,359
4298
02/28/00 Randazzo Supply
4485 Bell
16608
6,927
4331
03/16/00 Randazzo Supply
4485 Bell
17722
1,063
4340
05/25/00 Randazzo Supply
4485 Bell
18844
2,001
4373
07/03/00 Randazzo Supply
4485 Bell
19442
7,123
4395
08/24/00 Randazzo Supply
4485 Bell
20014
6,542
4424
10/02/00 Randazzo Supply
4485 Bell
21114
2,936
4443
11/06/00 Randazzo Supply
4485 Bell
21456
5,513
4467
12/04/00 Randazzo Supply
4485 Bell
21697
3,725
4490
01/11/01 Randazzo Supply
4485 Bell
21877
5,863
4508
02/15/01 Randazzo Supply
4485 Bell
21935
11,760
4526
03/12/01 Randazzo Supply
4485 Bell
22035
2,241
4542
04/05/01 Randazzo Supply
4485 Bell
22455
3,587
4558
06/18/01 Randazzo Supply
4485 Bell
22688
1,025
4625
07/30/01 Randazzo Supply
4485 Bell
22758
6,497
4647
09/04/01 Randazzo Supply
4485 Bell
22876
6,562
4663
10/25/01 Randazzo Supply
4485 Bell
22977
6,610
4711
11/26/01 Randazzo Supply
4485 Bell
23221
4,740
4738
12/13/01 Randazzo Supply
4485 Bell
22458
5,969
4752
12/27/01 Randazzo Supply
4485 Bell
22689
7,158
4774
01/10/02 Randazzo Supply
4485 Bell
22897
13,394
4790
01/31/02 Randazzo Supply
4485 Bell
22924
1,554
4809
02/14/02 Randazzo Supply
4485 Bell
23041
5,452
4823
03/11/02 Randazzo Supply
4485 Bell
23158
4,645
4841
04/15/02 Randazzo Supply
4485 Bell
23488
3,585
4865
05/20/02 Randazzo Supply
4485 Bell
23652
5,624
4901
06/10/02 Randazzo Supply
4485 Bell
23798
5,166
4919
06/27/02 Randazzo Supply
4485 Bell
23985
6,441
4956
07/21/02 Randazzo Supply
4485 Bell
24001
15,698
4981
08/08/02 Randazzo Supply
4485 Bell
24125
6,588
5003
09/05/02 Randazzo Supply
4485 Bell
24225
2,014
5026
09/19/02 Randazzo Supply
4485 Bell
24658
2,255
5042
09/30/02 Randazzo Supply
4485 Bell
24787
1,547
5068
10/03/02 Randazzo Supply
4485 Bell
24821
4,855
5076
10/21/02 Randazzo Supply
4485 Bell
24885
4,500
5082
10/24/02 Randazzo Supply
4485 Bell
24890
8,544
5095
11/25/02 Randazzo Supply
4485 Bell
25001
5,548
5130
12/16/02 Randazzo Supply
4485 Bell
25125
6,947
5163
12/30/02 Randazzo Supply
4485 Bell
25225
7,488
5179
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 13
Revised: 05/05/04
Practical Problem 3
215,046
01/02/00 Seros
2585 Rydel
1860
7,024
4285
01/06/00 Seros
2585 Rydel
1887
6,277
4288
03/09/00 Seros
2585 Rydel
2001
416
4336
05/11/00 Seros
2585 Rydel
2125
962
4368
07/06/00 Seros
2585 Rydel
2456
4,464
4396
08/28/00 Seros
2585 Rydel
2658
7,044
4425
10/09/00 Seros
2585 Davidson
2987
6,963
4448
11/13/00 Seros
2585 Davidson
3078
3,940
4469
01/22/01 Seros
2585 Davidson
3224
2,245
4515
03/12/01 Seros
2585 Davidson
3450
4,802
4541
05/24/01 Seros
2585 Davidson
3620
4,174
4603
07/02/01 Seros
2585 Davidson
3758
4,159
4631
09/13/01 Seros
2585 Davidson
3825
7,572
4670
09/27/01 Seros
2585 Davidson
3877
6,257
4682
10/04/01 Seros
2585 Davidson
3997
5,537
4693
10/22/01 Seros
2585 Davidson
4015
952
4710
11/19/01 Seros
2585 Davidson
4125
6,052
4732
12/06/01 Seros
2585 Davidson
4466
3,021
4748
12/24/01 Seros
2585 Davidson
4499
268
4769
12/27/01 Seros
2585 Davidson
4507
3,804
4771
01/03/02 Seros
2585 Davidson
4600
5,188
4784
01/22/02 Seros
2585 Davidson
4625
119
4799
03/11/02 Seros
2585 Davidson
4844
6,255
4842
04/22/02 Seros
2585 Davidson
4924
3,030
4881
05/09/02 Seros
2585 Davidson
4968
7,713
4895
06/17/02 Seros
2585 Davidson
4991
6,983
4922
06/17/02 Seros
2585 Davidson
4992
1,693
4923
06/24/02 Seros
2585 Davidson
4998
3,225
4936
07/11/02 Seros
2585 Davidson
5020
9,259
4970
07/25/02 Seros
2585 Davidson
5044
2,014
4991
08/15/02 Seros
2585 Davidson
5089
6,451
5008
09/16/02 Seros
2585 Davidson
5125
6,528
5034
09/16/02 Seros
2585 Davidson
5126
7,548
5035
09/19/02 Seros
2585 Davidson
5130
4,058
5041
09/23/02 Seros
2585 Davidson
5140
7,755
5048
09/30/02 Seros
2585 Davidson
5149
6,477
5064
10/03/02 Seros
2585 Davidson
5160
5,447
5073
10/21/02 Seros
2585 Davidson
5189
841
5086
10/28/02 Seros
2585 Davidson
5199
6,558
5103
11/04/02 Seros
2585 Davidson
5210
2,866
5116
12/23/02 Seros
2585 Davidson
5255
9,688
5171
12/26/02 Seros
2585 Davidson
5260
3,884
5173
12/30/02 Seros
2585 Davidson
5278
5,488
5182
205,001
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 14
Revised: 05/05/04
Practical Problem 3
04/09/01 Top Q
2461 Harkins
200104001 9,348
4560
04/15/01 Top Q
2461 Harkins
200104010 11,920
4569
04/26/01 Top Q
2461 Harkins
200104026 6,770
4575
05/03/01 Top Q
2461 Harkins
200105040 9,401
4582
05/14/01 Top Q
2461 Harkins
200105055 2,828
4593
05/17/01 Top Q
2461 Harkins
200105060 13,869
4595
05/17/01 Top Q
2461 Harkins
200105061 2,786
4597
05/24/01 Top Q
2461 Harkins
200105070 15,258
4602
05/28/01 Top Q
2461 Harkins
200105075 2,779
4607
06/04/01 Top Q
2461 Harkins
200106079 5,989
4611
06/14/01 Top Q
2461 Harkins
200106084 5,955
4618
06/25/01 Top Q
2461 Harkins
200106089 9,358
4629
06/28/01 Top Q
2462 Harkins
200106092 9,358
4630
01/17/02 Top Q
2461 Harkins
200201099 5,719
4797
02/25/02 Top Q
2461 Harkins
200202102 6,553
4830
03/04/02 Top Q
2461 Harkins
200203104 6,946
4837
03/11/02 Top Q
2462 Harkins
200203106 3,005
4840
03/28/02 Top Q
2461 Harkins
200203108 9,793
4857
04/08/02 Top Q
2461 Harkins
200204115 8,598
4864
04/15/02 Top Q
2461 Harkins
200204120 6,245
4879
04/29/02 Top Q
2461 Harkins
200204130 3,507
4894
05/13/02 Top Q
2461 Harkins
200205135 3,529
4898
05/20/02 Top Q
2461 Harkins
200205140 2,807
4902
06/17/02 Top Q
2461 Harkins
200206142 15,258
4921
06/27/02 Top Q
2461 Harkins
200206160 12,998
4942
07/11/02 Top Q
2461 Harkins
200207170 15,182
07/15/02 Top Q.
2461 Harkins
200207190
8,500
4978
07/15/02 Top Q.
2461 Harkins
200207191
9,680
4979
07/15/02 Top Q.
2461 Harkins
200207192
9,200
4980
07/22/02 Top Q.
2461 Harkins
200207202
5,266
4982
07/29/02 Top Q.
2461 Harkins
200207210
3,477
4993
07/29/02 Top Q.
2461 Harkins
200207211
4,500
4995
08/02/02 Top Q.
2461 Harkins
200208213
1,653
4996
08/06/02 Top Q.
2461 Harkins
200208215
2,350
5001
08/12/02 Top Q.
2461 Harkins
200208220
6,399
5004
08/12/02 Top Q.
2461 Harkins
200208221
2,789
5006
08/15/02 Top Q.
2461 Harkins
200208225
5,688
5007
08/19/02 Top Q.
2461 Harkins
200208230
8,593
5012
08/19/02 Top Q.
2461 Harkins
200208231
3,698
5014
08/25/02 Top Q.
2461 Harkins
200208240
3,756
5016
08/29/02 Top Q.
2461 Harkins
200208244
4,525
5025
09/09/02 Top Q.
2461 Harkins
200209249
6,884
5031
09/12/02 Top Q.
2461 Harkins
200209251
1,258
5032
09/23/02 Top Q.
2461 Harkins
200209268
2,487
5050
09/26/02 Top Q.
2461 Harkins
200209270
6,489
5054
10/03/02 Top Q.
2461 Harkins
200210298
7,500
5074
10/07/02 Top Q.
2461 Harkins
200210310
1,248
5077
4971
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 15
Revised: 05/05/04
Practical Problem 3
10/21/02 Top Q.
2461 Harkins
200210324
3,658
5085
10/21/02 Top Q.
2461 Harkins
200210325
4,658
5087
11/04/02 Top Q.
2461 Harkins
200210347
846
5117
11/11/02 Top Q.
2461 Harkins
200211351
4,247
5118
11/14/02 Top Q.
2461 Harkins
200211369
2,657
5120
11/18/02 Top Q.
2461 Harkins
200211375
7,421
5127
11/21/02 Top Q.
2461 Harkins
200211390
4,500
5128
11/25/02 Top Q.
2461 Harkins
200211395
2,355
5136
12/02/02 Top Q.
2461 Harkins
200212402
2,500
5151
12/12/02 Top Q.
2461 Harkins
200212412
1,250
5161
12/19/02 Top Q.
2461 Harkins
200212424
2,500
5168
12/23/02 Top Q.
2461 Harkins
200212438
4,500
5172
352,791
01/18/00 Warehouse Eqpmt
1694 Rydel
180012
2,131
4299
03/29/00 Warehouse Eqpmt
1694 Rydel
180145
4,959
4345
05/24/00 Warehouse Eqpmt
1694 Rydel
180445
7,226
4371
07/02/00 Warehouse Eqpmt
1694 Rydel
180624
1,036
4394
09/04/00 Warehouse Eqpmt
1694 Rydel
180789
7,258
4428
10/29/00 Warehouse Eqpmt
1694 Rydel
180982
1,984
4460
11/13/00 Warehouse Eqpmt
1694 Rydel
181002
3,765
4468
12/24/00 Warehouse Eqpmt
1694 Rydel
181242
2,043
4498
01/13/01 Warehouse Eqpmt
1694 Rydel
181298
7,022
4509
03/13/01 Warehouse Eqpmt
1694 Rydel
181355
7,675
4543
05/25/01 Warehouse Eqpmt
1694 Rydel
181488
2,505
4604
07/13/01 Warehouse Eqpmt
1694 Rydel
181628
4,632
4638
08/07/01 Warehouse Eqpmt
1694 Rydel
181754
8,895
4652
09/05/01 Warehouse Eqpmt
1694 Rydel
181799
5,447
4664
10/09/01 Warehouse Eqpmt
1694 Rydel
181825
2,624
4699
11/20/01 Warehouse Eqpmt
1694 Rydel
181840
2,548
4733
12/28/01 Warehouse Eqpmt
1694 Rydel
181896
3,099
4777
01/07/02 Warehouse Eqpmt
1694 Rydel
181954
3,867
4785
01/22/02 Warehouse Eqpmt
1694 Rydel
181987
4,613
4800
02/07/02 Warehouse Eqpmt
1694 Rydel
182014
2,599
4817
03/11/02 Warehouse Eqpmt
1694 Rydel
182041
8,302
4843
04/15/02 Warehouse Eqpmt
1694 Rydel
182099
4,955
4880
05/13/02 Warehouse Eqpmt
1694 Adams
182658
5,410
4896
06/27/02 Warehouse Eqpmt
1694 Adams
182775
1,865
4943
07/22/02 Warehouse Eqpmt
1694 Adams
182875
2,547
4985
08/12/02 Warehouse Eqpmt
1694 Adams
182980
2,566
5005
09/16/02 Warehouse Eqpmt
1694 Adams
182990
7,844
5036
09/30/02 Warehouse Eqpmt
1694 Adams
183024
2,366
5063
10/10/02 Warehouse Eqpmt
1694 Adams
183120
4,857
5077
10/24/02 Warehouse Eqpmt
1694 Adams
183145
4,250
5096
10/24/02 Warehouse Eqpmt
1694 Adams
183461
6,599
5097
11/25/02 Warehouse Eqpmt
1694 Adams
183486
2,624
5135
12/16/02 Warehouse Eqpmt
1694 Adams
183652
2,488
5164
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 16
Revised: 05/05/04
Practical Problem 3
12/30/02 Warehouse Eqpmt
1694 Adams
183798
3,188
5180
145,789
©2004 Association of Certified Fraud Examiners
Conducting Internal Investigations – US
Page 17
Revised: 05/05/04
Practical Problem 4
You pull the vendor agreements for the vendors selected (which are found on the following
pages). Some of the vendors have long standing relationships with JMC while others have been
fairly new. You also pull a sample of the requisitions and can find all of them except for the ones
for Lantern Co. You then go to accounts payable and match the requisitions that you found in
purchasing with the invoices that have been paid for each vendor. The invoices you have pulled
contain the required paperwork and have the proper authorizations, even for Lantern.
While in accounts payable you start talking with one of the accounting clerks, Beth Ann, who
tells you that Mr. Brackens is a very demanding manager and is very big on providing prompt
payment to the vendors. In fact, for one vendor whom he says is very picky, he has to pick up
their checks and personally deliver them. Beth Ann recalls that the account is Lantern Co. For a
couple other accounts, he wants to know every month when their checks go out. He says he’s
having to monitor them since they are fairly new. He used to do that for some other accounts, but
not any more. Although she couldn’t remember the ones that he doesn’t ask for any more, he
does keep an eye on Top Q and Blues Pro. This is probably a good thing, since we pay them
more than others. You pull the checks and they have all been deposited into the vendor’s
checking accounts.
Questions:
1. Is there fraud? Why or why not?
2. Will you expand your audit? How?
3. Do you have predication for a fraud examination? Why or why not?
4. What fraud schemes could be occurring?
Practical Problem 4
5. Who do you suspect? Why?
6. Who don’t you suspect? Why?
7. What are your next steps?
Practical Problem 4
JMC
New Vendor Authorization
Vendor Name:
Black IPS
Mailing Address: PO Box 17758
City/State/Zip:
Street Address:
Telephone Number: 478-2245
Tax ID:
74-4752201
Date in Business: 5/15/65
Owner/CEO
Ronald Black
JMC Contact:
Russell O’Neil
Contact Telephone #:
478-2245
Austin, TX 78701
1701 West Ave
References:
Pace Industries
Bellville Products
Vendor checked by:
12/15/72
Vendor Code:
1432
Approved by:
Jim Miller
Welcome letter: 1/15/73
S. Smith
Date Checked:
Date Approved:
12/30/72
Comments:
Very impressed with the quality of the products. Their references
checked out well.
Practical Problem 4
JMC
New Vendor Authorization
Vendor Name:
Warehouse Equipment
Mailing Address: 4221 Braker Lane
City/State/Zip:
Street Address:
Austin, TX 78732
4221 Braker Lane
Black IPS
Tressle Inc.
Vendor checked by:
9/22/81
Vendor Code:
1694
Approved by:
Jim Miller
Welcome letter: 10/1/81
Telephone Number: 432-2699
Tax ID:
74-4765441
Date in Business: 8/20/80
Owner/CEO
Bill Stephens
JMC Contact:
Tom McLean
Contact Telephone #:
432-2699
References:
S. Smith
Date Checked:
Date Approved:
10/12/81
Comments:
Showroom was clean and tidy. Mr. McLean will be easy to work with.
Mr. Stephens
has assured us that all orders will be delivered as promise or else there will be a substantial
discount.
Practical Problem 4
JMC
New Vendor Authorization
Vendor Name:
Lantern Co.
Mailing Address: PO Box 4620
City/State/Zip:
Street Address:
Austin, TX 78701
Smith & Jones
George Fox & Associates
Vendor checked by:
T. Brackens
10/25/95
Vendor Code:
2365
Approved By:
T. Brackens
Welcome letter: 10/25/95
Telephone Number: 432-9999
Tax ID:
74-4765224
Date in Business: 10/15/95
Owner/CEO
Thomas Zachary
JMC Contact:
Thomas Zachary
Contact Telephone #:
432-9999
References:
Comments:
Date Checked:
Date Approved:
10/25/95
Practical Problem 4
JMC
New Vendor Authorization
Vendor Name:
Oak Hill Distributors
Mailing Address: 700 LaVaca Street
City/State/Zip:
Street Address:
Telephone Number: 478-1074
Tax ID:
74-4635446
Date in Business: 12/15/80
Owner/CEO
Robert Childs
JMC Contact:
Jeri Davids
Contact Telephone #:
478-1074
Austin, TX 78701
700 LaVaca Street
References:
Randazzo Supply
Volks Industries
Vendor checked by:
2/15/85
Vendor Code:
1567
Approved by:
Jim Miller
Welcome letter: 2/28/85
S. Smith
Date Checked:
Date Approved:
2/15/85
Comments:
Very impressed with location and sales associates. Their products are
fully guaranteed.
Practical Problem 4
JMC
New Vendor Authorization
Vendor Name:
Seros Inc.
Mailing Address: 10478 Anderson Road
City/State/Zip:
Street Address:
Austin, TX 78722
10478 Anderson Road
Robbins & Co
Taylor Inc.
Vendor checked by:
9/15/91
Vendor Code:
2585
Approved by:
T Brackens
Welcome letter: 9/25/91
Telephone Number: 469-7000
Tax ID:
74-4765441
Date in Business: 4/15/90
Owner/CEO
Tad Seros
JMC Contact:
Tim Seros
Contact Telephone #:
469-7000
References:
Comments:
A. Harkins
Date Checked:
Date Approved:
9/25/91
Practical Problem 4
JMC
New Vendor Authorization
Vendor Name:
Randazzo Supply
Mailing Address: 600 Guadaloupe
City/State/Zip:
Street Address:
Austin, TX 78701
10478 Anderson Road
Ribault & Associates
Parker-Tribune
Vendor checked by:
T. Brackens
4/20/84
Vendor Code:
4485
Approved by:
J. Miller
Welcome letter: 4/20/84
Telephone Number: 476-1075
Tax ID:
74-4747771
Date in Business: 2/10/84
Owner/CEO
Sam Randazzo
JMC Contact:
Tim Randazzo
Contact Telephone #:
476-1075
References:
Date Checked:
Date Approved:
4/20/84
Comments:
This is a family run operation run by brothers. They both seem to be very
excited to work with us. They will guarantee their prices and the quality. If their service
ever slips the owners want to know about it immediately
Practical Problem 4
JMC
New Vendor Authorization
Vendor Name:
AA Supply
Mailing Address: PO Box 1477
City/State/Zip:
Street Address:
Austin, TX 78701
1600 Trinity Street
Austin Supply
IBM
Vendor checked by:
5/15/90
Vendor Code:
3282
Approved by:
J. Miller
Welcome letter: 5/25/91
Telephone Number: 478-1200
Tax ID:
74-4907551
Date in Business: 06/17/87
Owner/CEO
Bill Taylor
JMC Contact:
Ed Billings
Contact Telephone #:
478-1200
References:
T. Brackens
Date Checked:
Date Approved:
5/20/90
Comments: Met with Mr. Taylor and Mr. Billings. All paperwork was in order. The office
staff is professional.
Practical Problem 4
JMC
New Vendor Authorization
Vendor Name:
Ad Systems
Mailing Address: PO Box 17854
City/State/Zip:
Street Address:
Telephone Number: 476-9522
Tax ID:
74-4221122
Date in Business: 4/15/95
Owner/CEO
Russ Sealy
JMC Contact:
Richard Lewis
Contact Telephone #:
476-9522
Austin, TX 78701
200 6th Street
References:
AA Supply
Stetson-Rollins
Vendor checked by:
4/20/95
Vendor Code:
8999
Approved by:
T. Brackens
Welcome letter: 4/20/92
Comments:
T. Brackens
Date Checked:
Date Approved:
4/20/95
Practical Problem 4
JMC
New Vendor Authorization
Vendor Name:
Top Q.
Mailing Address: PO Box 47000
City/State/Zip:
Street Address:
Austin, TX 78701
3895 Lamar Street
Blues Pro
Driskell Co.
Vendor checked by:
10/05/00
Vendor Code:
2461
Approved by:
T. Brackens
Welcome letter: 5/05/97
Telephone Number: 432-1600
Tax ID:
74-4745555
Date in Business: 8/15/00
Owner/CEO
Robert Brill
JMC Contact:
Robert Brill
Contact Telephone #:
432-1600
References:
Comments:
T. Brackens
Date Checked:
Date Approved:
10/00/00
Practical Problem 4
JMC
New Vendor Authorization
Vendor Name:
Blues Pro
Mailing Address: PO Box 47100
City/State/Zip:
Street Address:
Telephone Number: 432-1645
Tax ID:
74-4745555
Date in Business: 8/15/00
Owner/CEO
Steven Brill
JMC Contact:
Steven Brill
Contact Telephone #:
432-1645
Austin, TX 78701
3990 Lamar Street
References:
Top Q
Aspen Ltd.
Vendor checked by:
Vendor Code:
2460
Approved by:
T. Brackens
Welcome letter: 5/05/97
Comments:
A. Harkins
Date Checked:10/20/00
Date Approved:
10/20/00
Practical Problem 5
Mr. Brackens starts calling you every day to find out what’s going on in the audit. You let
him know that it’s coming along and how appreciative you are of the cooperation. He lets you
know that he wants to be informed of everything you find in the audit. He doesn’t want to wait
until the report goes out, so if there are problems in this area, he wants to be able to fix them right
away. He lets you know that he has been a loyal employee of JMC for a very long time, and he
wants his department to be the most efficient in the company. He expects a call from you every
day until the audit is over.
You go to human resources and review the employee files for the purchasing department.
They follow. There is nothing in the files that indicates that anyone is having financial problems.
You perform a public records search on Thomas Brackens. There isn’t a whole lot on him. He
has owned two homes, one on Twin Rivers Road with Diana Brackens and is currently assessed at
$125,000 and second one on Riverplace Drive with Laura Brackens and is assessed at $300,000.
He is divorced from Diana and pays no alimony or child support. He is responsible for Diana’s
house payment, which is approximately $485 per month. The house is just about paid off, only 3
more years and he’s done. Diana is responsible for the payment of real estate taxes and utilities.
The divorce papers do not give you a hint as to whether or not it was amicable, but he remarried
shortly after his divorce was final. He also owns two cars, a Lincoln Town car and a Lexus SUV.
The cars are approximately 3 years old and paid for. He also owns a 24 foot sailboat that he keeps
on Lake Travis. He has owned the sailboat for five years. Performing a corporate records search,
you find that Brackens is listed as the owner of Lantern Co. His son, Thomas Jr. is also an owner.
Searches on the other employees have not turned up anything unusual except you find that
Angela Harkins’ husband works for Oak Hill Distributors and has for approximately five years.
Questions:
1. Is there anything in the personnel files that make you suspicious? If so, what?
2. Has fraud occurred? Why or why not?
3. Who are your suspects?
Practical Problem 5
4. What is your fraud theory?
5. How will you prove it?
JMC
716 Red River Avenue Austin, Texas
Employment Application
Employee No.
Last Name
First Name
Middle Name
Social Security No.
1405
Brackens
Thomas
Z
345-09-9898
State
Zip
Telephone
14017 Twin Rivers Road Austin
Texas
78701
512-219-8903
Date of Birth
Gender
Date of hire(leave blank)
Position
Direct Supervisor(leave blank)
2/14/50
Male
4/8/75
Purchasing Buyer
J. Miller
Address
City
Employee Withholding
Marital Status
Total Allowances Claimed
Additional Withholding
Married
2
$0.00
High School
College
Degree
Parker High
Austin Junior College
AA
Exemption Claim
Full Time Student
No
No
Education
Additional College
Other
Insurance
Insurance Coverage
Employee
Spouse
Children
Health Coverage
Waived
Covered Persons
Employee
Spouse
Children
Yes
No
Coverage Effective Date
Thomas Brackens
Diana Brackens
Thomas Brackens, Jr.
Abby Brackens
08/01/75
Coverage Terminated
____________
Life Beneficiary
Relationship
Telephone No.
Address
Diana Brackens
Wife
512-219-8903
Same as above
Name
Relationship
Telephone No.
Address
Diana Brackens
Wife
512-219-8903
Same as above
Emergency Contact
Employment History
EMPLOYER
FROM
TO
WORK PERFORMED
Blue Company
11/72
3/75
ADDRESS
TELEPHONE
JOB TITLE
600 West Ave
512-379-4570
Buyer
Purchased office supplies
Filing and Billing clerk
STARTING SALARY
FINAL SALARY
SUPERVISOR
$16,000
$18,000
Jack Adams
REASON FOR LEAVING
Seeking other opportunities.
EMPLOYER
FROM
TO
WORK PERFORMED
US Army
12/68
8/72
Procurement clerk
ADDRESS
TELEPHONE
JOB TITLE
Helicopter mechanic
SGT – E4
Fort Hood, TX
STARTING SALARY
FINAL SALARY
SUPERVISOR
SGT Smith
REASON FOR LEAVING
Did not Re enlist
JMC
716 Red River Avenue Austin, Texas
Personnel Change Request
Employee No.
Last Name
First Name
Middle Name
Social Security No.
1405
Brackens
Thomas
Z
345-09-9898
Change:
Change spouse to Laura Brackens. Change beneficiary and emergency contact to Laura
Brackens. Our telephone number is 219-4884 (as is mine). Our new address is 10701
Riverplace Drive, Austin, TX 78761. Also please add her to the health insurance policy,
Delete Diana from insurance (health and life). Laura’s birth date is 6/7/64.
Thomas Brackens
Director, Purchasing
JMC
Effective Date:
Signature:
8/1/96
Tom Brackens
JMC
716 Red River Avenue Austin, Texas
Performance Appraisal
Employee No.
Last Name
First Name
Middle Name
Social Security No.
1405
Brackens
Thomas
Z
345-09-9898
Date in Position
4/8/75
4/15/78
5/1/85
4/1/91
Position Title
Junior Buyer
Senior Buyer
Manager, Purchasing
Director, Purchasing
Salary
$19,250
$25,000
$33,000
$44,000
(1-Outstanding, 2 – Very Good, 3-Average, 4-Below Average, 5-Unsatisfactory)
PERFORMANCE
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
PRIMARY
ABILITIES
GENERAL JOB
SKILLS
MANAGEMENT
TRAITS
OVERALL
PERFORMANCE
1
1
2
2
1
1
1
1
1
2
2
1
2
2
2
1
2
2
1
2
2
2
3
2
2
2
1
1
1
1
2
2
2
2
2
2
2
1
1
1
1
2
2
2
Salary History— Last 8 years
DATE
05/15/95
05/15/96
05/15/97
05/15/98
05/15/99
05/15/00
05/15/01
05/15/02
SALARY OR HOURLY RATE
$53,000
$55,000
$60,000
$62,000
$64,000
$65,000
$68,000
$70,000
POSITION
01072340
01072340
01072340
01072340
01072340
01072340
01072340
01072340
REASON FOR CHANGE
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
AUTHORIZATION
J. Miller
J. Miller
J. Miller
J. Miller
J. Miller
J. Miller
J. Miller
J. Miller
JMC
716 Red River Avenue Austin, Texas
Employment Application
Employee No.
Last Name
First Name
Middle Name
Social Security No.
N/A
Harkins
Angela
Rene
265-01-8099
Address
City
State
Zip
Telephone
17 Gates Lane #41
Austin
Texas
78726
512-445-4528
Date of Birth
Gender
Date of hire
Position
Direct Supervisor
10/16/62
Female
8/1/85
Purchasing Buyer
T. Brackens
Employee Withholding
Marital Status
Total Allowances Claimed
Additional Withholding
Married
2
0
High School
College
Degree
Austin High
Insurance
UT- San Antonio
BSBA
Insurance Coverage
Health Coverage
Waived
Exemption Claim
Full Time Student
No
No
Education
Employee
Spouse
Children
Yes
No
Additional College
Other
Covered Persons
Employee
Spouse
Children
Coverage Effective Date
Angela Harkins
Matthew Harkins
Hayley Joy Harkins
11/01/85
Coverage Terminated
____________
Life Beneficiary
Relationship
Telephone No.
Address
Matthew Harkins
Husband
Same as above
Same as above
Name
Relationship
Telephone No.
Address
Matthew Harkins
Employment History
Husband
Same as above
Same as above
Emergency Contact
EMPLOYER
FROM
TO
WORK PERFORMED
Longhorn Company
6/82
8/85
ADDRESS
TELEPHONE
JOB TITLE
600 Trinity Ave
512-478-0001
Senior Buyer
Purchased all machinery
Progressed from Junior buyer
STARTING SALARY
FINAL SALARY
SUPERVISOR
$21,000
$23,000
Rich Thomas
to Senior buyer
REASON FOR LEAVING
Limited opportunities with current company. Seeking employment with larger company.
EMPLOYER
FROM
TO
WORK PERFORMED
UT- San Antonio
9/78
4/82
Typing, filing, answering
ADDRESS
TELEPHONE
JOB TITLE
Telephones, general office work
University Way
Various
STARTING SALARY
FINAL SALARY
SUPERVISOR
Part time – Hourly
Part time Hourly
Jenny Quinn
REASON FOR LEAVING
Graduated from college – looking for a permanent position in college major
JMC
716 Red River Avenue Austin, Texas
Performance Appraisal
Employee No.
Last Name
First Name
Middle Name
Social Security No.
N/A
Harkins
Angela
Rene
265-01-8099
Date in Position
08/01/85
9/15/87
05/01/89
8/01/91
Position Title
Junior Buyer
Senior Buyer
Supervisor, Accounts Payable
Manager, Purchasing
Salary
$24,000
$28,000
$32,000
$36,000
(1-Outstanding, 2 – Very Good, 3-Average, 4-Below Average, 5-Unsatisfactory)
PERFORMANCE
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
PRIMARY
ABILITIES
GENERAL JOB
SKILLS
MANAGEMENT
TRAITS
OVERALL
PERFORMANCE
2
1
2
2
2
1
1
1
1
1
1
3
2
2
2
2
2
2
1
1
1
1
3
2
2
2
2
2
1
1
1
1
1
3
2
2
2
2
2
1
1
1
1
1
Salary History— Last 8 years
DATE
05/15/95
05/15/96
05/15/97
05/15/98
05/15/99
05/15/00
05/15/01
05/15/02
SALARY OR HOURLY RATE
$40,000
$41,000
$42,000
$46,000
$48,500
$49,800
$50,800
$60,200
POSITION
01072342
01072342
01072342
01072342
01072342
01072342
01072342
01072342
REASON FOR CHANGE
Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
AUTHORIZATION
T. Brackens
T. Brackens
T. Brackens
T. Brackens
T. Brackens
T. Brackens
T. Brackens
T. Brackens
JMC
716 Red River Avenue Austin, Texas
Employment Application
Employee No.
Last Name
First Name
Middle Name
Social Security No.
N/A
Rydel, Jr.
James
Louis
225-44-8080
Zip
Telephone
Address
City
State
7302 Robin Gates Austin
Lane
Texa 78740
s
512-345-2245
Date of Birth
Date of hire (leave blank)
Position
Direct Supervisor (leave blank)
9/1/92
Purchasing
Buyer
A. Harkins
09/13/65
Gender
Male
Employee Withholding
Marital Status
Total Allowances Claimed
Additional Withholding
Exemption Claim
Full Time Student
Married
3
0
No
No
High School
College
Degree
Parker
High
UT- El Paso
BBA
Education
Additional College
Other
Insurance
Insurance Coverage
Employee
Spouse
Children
Health Coverage
Waived
Yes
No
Covered Persons
Employee
Spouse
Children
James Rydel, Jr.
Edie Rydel
John James Rydel
Coverage Effective Date
12/01/92
Coverage Terminated
____________
Life Beneficiary
Relationship
Telephone No.
Address
John James
Rydel
Son
Same as
above
Same as above
Name
Relationship
Telephone No.
Address
Edie Rydel
spouse
Same as
above
Same as above
Emergency Contact
Employment History
EMPLOYER
FROM
TO
WORK PERFORMED
Randazzo Supply
6/89
9/92
ADDRESS
TELEPHONE
JOB TITLE
Supervised
purchasing staff
Negotiated
contracts with
STARTING SALARY
FINAL SALARY
SUPERVISOR
600 Guadaloupe
$25,000
476-1075
$27,000
Supvr
Purchasing
Tim
Randazzo
vendors
REASON FOR LEAVING
Limited advancement – small company, family owned and operated
EMPLOYER
FROM
TO
WORK PERFORMED
Austin Systems
6/87
6/89
Purchased paper
supplies
ADDRESS
TELEPHONE
JOB TITLE
STARTING SALARY
FINAL SALARY
SUPERVISOR
$22,000
$24,500
Jules
Rogers
618 Guadaloupe
476-5588
Jr. Buyer
JMC
716 Red River Avenue Austin, Texas
REASON FOR LEAVING
Better benefits and pay at new employer
JMC
716 Red River Avenue Austin, Texas
Performance Appraisal
Employee No.
Last Name
First Name
Middle Name
Social Security No.
N/A
Rydel, Jr.
James
Lewis
225-44-8080
Date in Position
09/01/92
09/15/95
Position Title
Junior Buyer
Senior Buyer
Salary
$26,000
$30,000
(1-Outstanding, 2 – Very Good, 3-Average, 4-Below Average, 5-Unsatisfactory)
PERFORMANCE
PRIMARY
ABILITIES
GENERAL JOB
SKILLS
MANAGEMENT
TRAITS
OVERALL
PERFORMANCE
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2
2
1
2
2
2
1
1
1
1
2
2
1
2
2
2
1
1
2
2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2
2
1
2
2
2
1
1
2
2
Salary History— Last 8 years
DATE
09/01/95
05/15/96
05/15/97
05/15/98
05/15/99
05/15/00
05/15/01
05/15/02
SALARY OR HOURLY RATE
$30,000
$30,500
$32,000
$33,500
$34,900
$36,000
$37,200
$38,300
POSITION
01072343-1
01072343-1
01072343-1
01072343-1
01072343-1
01072343-1
01072343-1
01072343-1
REASON FOR CHANGE
Prom/Annual
Annual
Annual
Annual
Annual
Annual
Annual
Annual
AUTHORIZATION
A. Harkins
A. Harkins
A. Harkins
A. Harkins
A. Harkins
A. Harkins
A. Harkins
A. Harkins
JMC
716 Red River Avenue Austin, Texas
Employment Application
Employee No.
Last Name
First Name
Middle Name
Social Security No.
N/A
Bell
Ruth
Adams
246-56-2402
Zip
Telephone
Address
City
Austin
4545 Parker Ridge # 12
Date of Birth
12/12/68
State
Gender
Female
Texas 78759
512-445-4528
Date of hire (leave blank)
Position
Direct Supervisor (leave blank)
3/15/95
Purchasing Buyer
A. Harkins
Employee Withholding
Marital Status
Total Allowances Claimed
Additional Withholding
Exemption Claim
Full Time Student
Divorced
4
0
No
No
High School
College
Degree
Additional College
DC High
Georgetown
BBA
MBA
Education
Other
Insurance
Insurance Coverage
Employee
Spouse
Children
Health Coverage
Waived
Covered Persons
Employee
Spouse
Children
Yes
No
Coverage Effective Date
Ruth Bell
N/A
Benjamin Christopher
Riley Bell
07/01/95
Coverage Terminated
____________
Life Beneficiary
Relationship
Telephone No.
Address
Estate
N/A
N/A
N/A
Name
Relationship
Telephone No.
Address
Millie Roberts
Mother
904 221-5602
1400 Ocean Woods, 32225
Emergency Contact
Employment History
EMPLOYER
FROM
TO
WORK PERFORMED
ADDRESS
TELEPHONE
JOB TITLE
And all electronic eqpmt
STARTING SALARY
FINAL SALARY
SUPERVISOR
EMPLOYER
FROM
TO
ADDRESS
TELEPHONE
JOB TITLE
STARTING SALARY
FINAL SALARY
SUPERVISOR
Oak Hill Distributors
700 LaVaca Street
$26,000
6/90
512-478-1074
$30,000
3/95
Buyer
Purchased computers
Jeri Davids
REASON FOR LEAVING
Cutting back on staff
Summer jobs while in school
REASON FOR LEAVING
Graduated – Moved to Austin
WORK PERFORMED
Park ranger, office asst
Camp counselor
JMC
716 Red River Avenue Austin, Texas
Performance Appraisal
Employee No.
Last Name
First Name
Middle Name
Social Security No.
N/A
Bell
Ruth
Roberts
246-56-2402
Date in Position
03/15/95
3/15/98
Position Title
Junior Buyer
Senior Buyer
Salary
$30,000
$35,000
(1-Outstanding, 2 – Very Good, 3-Average, 4-Below Average, 5-Unsatisfactory)
PERFORMANCE
1992
1993
1994
1995
PRIMARY
ABILITIES
GENERAL JOB
SKILLS
MANAGEMENT
TRAITS
OVERALL
PERFORMANCE
1996
1997
1998
1999
2000
2001
2002
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
Salary History— Last 8 years
DATE
03/15/96
03/15/97
03/15/98
03/15/99
03/15/00
03/15/01
03/15/02
SALARY OR HOURLY RATE
$31,000
$32,000
$35,000
$36,000
$37,500
$38,000
$40,500
POSITION
01072343-2
01072343-2
01072343-2
01072343-2
01072343-2
01072343-2
01072343-2
REASON FOR CHANGE
Annual
Annual
Promo/Annual
Annual
Annual
Annual
Annual
AUTHORIZATION
A. Harkins
A. Harkins
A. Harkins
A. Harkins
A. Harkins
A. Harkins
A. Harkins
JMC
716 Red River Avenue Austin, Texas
Employment Application
Employee No.
Last Name
First Name
Middle Name
Social Security No.
N/A
Troupe
Benjamin
Pierce
292-78-2544
State
Zip
Telephone
TX
78759
Address
City
Austin
1400 Great Hills Trail
Date of Birth
Gender
Date of hire (leave blank)
Position
Direct Supervisor (leave blank)
12/10/68
M
06/08/00
Purchasing Buyer
A. Harkins
Employee Withholding
Marital Status
Total Allowances Claimed
S
2
Additional Withholding
0
High School
College
Degree
Rollins HIgh
LSU
BBA
Exemption Claim
Full Time Student
No
No
Education
Additional College
Other
Insurance
Insurance Coverage
Employee
Spouse
Children
Health Coverage
Waived
Yes
No
Covered Persons
Employee
Spouse
Children
Coverage Effective Date
Benjamin Troupe
09/01/00
Coverage Terminated
____________
Life Beneficiary
Relationship
Telephone No.
Address
Bobby Troupe
Brother
407 221.3687
PO Box 17425 32507
Name
Relationship
Telephone No.
Address
Alice James
Girlfriend
512.229.1234
2002 Orangedale, 78753
Emergency Contact
Employment History
EMPLOYER
Sarasota county
ADDRESS
FROM
1996
TO
1999
TELEPHONE
JOB TITLE
Lido Key MM 1
STARTING SALARY
Lifeguard
FINAL SALARY
Part-time job
SUPERVISOR
Eddie Finch
WORK PERFORMED
Lifeguard Lido Key
Rescued bathers, gave
first-aid, CPR
REASON FOR LEAVING
Summer job while attending College
EMPLOYER
FROM
TO
ADDRESS
TELEPHONE
JOB TITLE
STARTING SALARY
FINAL SALARY
SUPERVISOR
REASON FOR LEAVING
WORK PERFORMED
JMC
716 Red River Avenue Austin, Texas
Performance Appraisal
Employee No.
Last Name
First Name
Middle Name
Social Security No.
N/A
Troupe
Benjamin
Pierce
292-78-2544
Date in Position
06/08/00
Position Title
Junior Buyer
Salary
$28,000
(1-Outstanding, 2 – Very Good, 3-Average, 4-Below Average, 5-Unsatisfactory)
PERFORMANCE
1992
1993
1994
1995
1996
1997
1998
1999
PRIMARY
ABILITIES
GENERAL JOB
SKILLS
MANAGEMENT
TRAITS
OVERALL
PERFORMANCE
2000
2001
2002
2
2
2
2
NA
NA
2
2
Salary History— Last 8 years
DATE
6/15/01
6/15/02
SALARY OR HOURLY RATE
$29,000
$31,000
POSITION
01072344-1
01072344-1
REASON FOR CHANGE
Annual
Annual
AUTHORIZATION
A. Harkins
A. Harkins
JMC
716 Red River Avenue Austin, Texas
Employment Application
Employee No.
Last Name
First Name
Middle Name
N/A
Davidson
Rhonda
Cheryl
325-17-0040
State
Zip
Telephone
Texas
78730
Address
City
1407 Brodie Lane
Austin
Social Security No.
512-449-1617
Date of Birth
Gender
Date of hire (leave blank)
Position
Direct Supervisor (leave blank)
8/29/72
Female
11/15/98
Accountant
S. Potter
Employee Withholding
Marital Status
Total Allowances Claimed
Additional Withholding
High School
College
Degree
Additional College
Other
Richfield
Duke
BBA
MBA courses
CMA
S
2
0
Exemption Claim
Full Time Student
No
No
Education
Insurance
Insurance Coverage
Employee
Spouse
Children
Health Coverage
Waived
Covered Persons
Employee
Spouse
Children
Yes
No
Coverage Effective Date
Rhonda Davidson
N/A
N/A
02/01/99
Coverage Terminated
____________
Life Beneficiary
Relationship
Telephone No.
Address
Sarah Evans
sister
202-847-4747
Gruner Lane, 21201
Name
Relationship
Telephone No.
Address
Royce Lewis
Friend
219-4678
Stone Canyon # 1701
Emergency Contact
Employment History
EMPLOYER
FROM
TO
WORK PERFORMED
Black IPS
11/96
11/98
ADDRESS
TELEPHONE
JOB TITLE
1701 West
478-2245
Accountant
Reconciled A/P; paid
Invoices; ordered
supplies
STARTING SALARY
FINAL SALARY
SUPERVISOR
20,000
24,000
Russell O’Neil
REASON FOR LEAVING
More opportunities elsewhere
EMPLOYER
FROM
TO
WORK PERFORMED
Coastal Power
11/96
11/98
ADDRESS
TELEPHONE
JOB TITLE
1010 Ocean Mount
Drive
212 426-8900
Acctg Spvsr
Worked way up from
Accountant to A/P
STARTING SALARY
FINAL SALARY
SUPERVISOR
24,000
30,000
Janet Edwards
REASON FOR LEAVING
Supervisor of 4 staff
JMC
716 Red River Avenue Austin, Texas
Performance Appraisal
Employee No.
Last Name
First Name
Middle Name
Social Security No.
N/A
Davidson
Rhonda
Cheryl
325-17-0040
Date in Position
11/15/98
10/01/00
Position Title
Accountant
Junior Buyer
Salary
$28,000
$30,000
(1-Outstanding, 2 – Very Good, 3-Average, 4-Below Average, 5-Unsatisfactory)
PERFORMANCE
1992
1993
1994
1995
1996
1997
PRIMARY
ABILITIES
GENERAL JOB
SKILLS
MANAGEMENT
TRAITS
OVERALL
PERFORMANCE
1998
1999
2000
2001
2002
2
1
1
1
2
2
1
1
2
2
N/A
N/A
2
2
1
1
Salary History— Last 8 years
DATE
11/15/99
10/15/00
10/15/01
10/15/02
SALARY OR HOURLY RATE
$29,000
$30,000
$31,000
$32,500
POSITION
02248547-2
01072344-3
01072344-3
01072344-3
REASON FOR CHANGE
Annual
Transfer/Annual
Annual
Annual
AUTHORIZATION
S. Potter
A. Harkins
A. Harkins
A. Harkins
JMC
716 Red River Avenue Austin, Texas
Employment Application
Employee No.
Last Name
First Name
N/A
Adams
Richard
Middle Name
Social Security No.
658-22-8575
Address
City
State
Zip
Telephone
5200 Whitcomb #1423
Austin
TX
78708
512 213-7744
Date of Birth
Gender
Date of hire (leave blank)
Direct Supervisor (leave blank)
12/27/78
M
Position
3/15/00
Marketing Assoc
J. Yates
Employee Withholding
Marital Status
Total Allowances Claimed
Additional Withholding
Exemption Claim
Full Time Student
Single
0
0
No
No
High School
College
Degree
Graham HS
Fresno State
BSBA
Education
Additional College
Other
Insurance
Insurance Coverage
Employee
Spouse
Children
Health Coverage
Waived
Covered Persons
Employee
Spouse
Children
Yes
No
Coverage Effective Date
Rick Adams
06/01/00
Coverage Terminated
____________
Life Beneficiary
Relationship
Telephone No.
Address
Randall Adams
Father
605 785-2525
12782 Overlook, 78442
Relationship
Telephone No.
Address
Father
605 785-2525
12782 Overlook, 78442
Emergency Contact
Name
Randall Adams
Employment History
EMPLOYER
FROM
TO
WORK PERFORMED
Zone electronics
2/99
3/00
ADDRESS
TELEPHONE
JOB TITLE
1425 Billings Street
804-226-1141
sales
Outside sales
electronics
STARTING SALARY
FINAL SALARY
SUPERVISOR
$18,000 + bonus
$20,000 +bonus
Billy Donova
EMPLOYER
FROM
TO
WORK PERFORMED
Beamer Supply
6/98
2/99
ADDRESS
TELEPHONE
JOB TITLE
Performed Quality
Control Checks
REASON FOR LEAVING
Moved to Austin
1075 Gibson Parkway
804-415-1620
Quality Analyst
STARTING SALARY
FINAL SALARY
SUPERVISOR
21,000
22,000
Ralph Baker
REASON FOR LEAVING
Not using skills learned in college – I was a marketing major
JMC
716 Red River Avenue Austin, Texas
Performance Appraisal
Employee No.
Last Name
First Name
N/A
Adams
Richard
Middle Name
Social Security No.
658-22-8575
Date in Position
03/15/00
06/01/02
Position Title
Marketing Associate
Junior Buyer
Salary
$22,000 (base)
$28,000
(1-Outstanding, 2 – Very Good, 3-Average, 4-Below Average, 5-Unsatisfactory)
PERFORMANCE
1992
1993
1994
1995
1996
1997
1998
1999
2000
PRIMARY
ABILITIES
GENERAL JOB
SKILLS
MANAGEMENT
TRAITS
OVERALL
PERFORMANCE
2001
2002
1
2
3
2
NA
2
2
2
Salary History— Last 8 years
DATE
3/15/01
3/15/02
SALARY OR HOURLY RATE
$24,000
$28,000
POSITION
01072344-3
01072344-3
REASON FOR CHANGE
Annual
Transfer/Annual
AUTHORIZATION
J. Yates
A. Harkins
JMC
716 Red River Avenue Austin, Texas
You decide to check out the telephone numbers for the vendors. All of the vendors have
telephone listings except for Lantern Co. You go by the address and there is a print shop called
Austin Printers. You go in and ask how long they have been there and if they have ever heard of
Lantern Co. They reply that the company has been at this location for 20 years. The owner
recognizes the name and said that a check came in for them once. But before he could send it
back, some young fellow came in and picked it up. He doesn’t remember anything else about the
incident and hasn’t seen any mail other than junk mail in a while. The junk mail he just throws
away. All of the other vendors check out when you call their telephone number.
Questions:
1. What will you do with this information?
2. Do you have enough to terminate Mr. Brackens? Why or why not?
3. What other documents will you need to prove your case?
4. Who would you interview? And in what order?
5. Do you feel comfortable interviewing the witnesses/suspects? If not, how will you handle
the investigation?
Practical Problem 7
You decide to interview Ronald Black, the owner of Black IPS. He brings in Russell O’Neill
who was their sales representative to JMC. He indicated that they no longer did business with
JMC. They had had a long standing relationship with them, but when Jim Miller retired, they
started doing less and less business with JMC. Mr. Black tried to salvage the account, but couldn’t.
He had some suspicions about it, but didn’t feel comfortable telling you. After a bit of prodding, he
tells you that he felt that Brackens was trying to shake them down. O’Neill had come to Black
sometime in 2001 and said that Brackens had hit him for making some kind of arrangement
between him (O’Neill) and Brackens. Brackens would make sure that business would come his
way if there some real good reason to do so. O’Neill told him that he would give him really good
prices and service, but that was all he could do. He was already giving JMC discounts, but that was
far as he could go. When Brackens told him he was missing the point, O’Neill said he would have
to get back with him. Brackens told him to forget it. After that, JMC started giving more and more
business to other vendors. O’Neill had heard that there were some vendors in town who didn’t have
the best reputation. They were brothers and located on Lamar. He didn’t feel comfortable telling
you anything else. When you asked him about Angela Harkins, he said that he had had lunch with
her and Brackens once or twice, but he didn’t know too much about her.
Questions:
1.
Based on this information, do you have enough to terminate Brackens? Why or why not.
2. Who else do you suspect at this time? Why or why not?
3. What is your next move?
Practical Problem 7
4. Who would you next interview?
5. What questions would you ask?
Practical Problem 8
By now Brackens is suspicious since you haven’t been keeping him up-to-date. He has to call
you every day to find out what’s going on, but you are vague. He says you were so gung-ho to get
this audit started and now you seem to be dragging your feet. He tells you that he is losing patience
with you and that he will go to your boss if necessary if you don’t finish soon. You thank him for
his feedback and continue with your investigation. You decide to interview other vendors and the
employees in the department. You let him know that you need to go over a few things with his
employees to explain department procedure. In fact, you would like to get with the employees right
away. After discussing procedures with the junior buyers individually, you find that follow
procedure as they were trained to do by Angela Harkins. They were consistent in their answers.
She is a hard working manager and helps them out when they get bogged down. In fact, she has
taken over a couple of the accounts to handle personally. They think that Brackens may have
asked her take care of them personally since she is having to write up the requisitions and sent
them to accounting. Only one of the buyers has heard of Lantern Co. Ruth Bell said that it is
special account for services rendered to executives of JMC. Mr. Brackens brings her the invoice
every month and she sets it up for accounting. She doesn’t know who they are, but Mr. Brackens
said that if it isn’t paid on a timely basis that the big wigs in the corporate offices would get angry
and that she would be the one they would blame. Besides he told her that he needed someone he
could count on to handle it personally. Flattered, she takes special care of the account. She asks if
there is a problem with the account, and you say that you are just trying to tie up some loose ends.
Regarding Top Q an Blues Pro, the buyers have been told that they are special accounts
requiring special handling. That is fine with them since they already have too much to do anyway.
Regarding Ad Sys, they have heard of them, but the vendor code is weird. That is an unusual code
for anyone to be using. It must be an override code. You thank each one and let them know that
you’ll be finishing up the audit soon.
Questions:
1. Who would you next interview? Why?
2. What questions would you ask?
3. Conduct the interview.
Practical Problem 9
You bring Harkins in to discuss your findings. She is unaware of anything wrong that is
occurring. She admits that her husband works for Oak Hill Distributors in their sales department,
but they were vendors before she ever came to work for the company. Their products and service
are competitive with anyone else in the business. In fact, they give JMC discounts where other
vendors won’t. Besides, everyone knows that her husband works for Oak Hill so what else could
be bothering you. She hasn’t done anything wrong. She only does what she is told to do by Mr.
Brackens. He has some accounts that he deals with personally, so who is she to question him.
He would only get mad at her if she said anything. These accounts have provided good products
and services, although she occasionally gets a complaint about them which is corrected
immediately. They seem to charge a little bit more than other vendors, but they make up for it by
being available at all times — or at least that’s what Mr. Brackens tells her. She fills out the
requisitions and he finishes them. She doesn’t know what happens to them after they leave her
desk. She is aware that he picks up checks for one of the vendors, but she doesn’t know who it
is. She has never heard of Lantern Co. She is willing to cooperate in any way with you, but she
doesn’t know anything and doesn’t want to get anyone in trouble.
You decide to get with the vendors for Top Q and Blues Pro. After getting down to business
you finally get them to admit that they are paying kickbacks to Brackens. They were just getting
started in business a couple of years ago when they called on Brackens. He let them know that if
they wanted his business they would have to give him some incentive. That incentive was 10%
of every invoice that was sent. But it wouldn’t cost the brothers anything since all they had to do
was mark up the invoices by 10%. The brothers agreed to do so and have been doing this ever
since. They paid him in cash. However, the company is getting a good buy for their bucks and
they would challenge anyone for the quality. The brothers want to know if they will lose JMC’s
business over this. You tell them it is out of their hands, but it would look better if they
cooperate. They’ll do anything you ask. You also get with Ad Sys and they adamantly refuse to
admit to anything. If you want anything else, go see their attorneys. They are insulted that you
would even hint that there is a problem with Brackens.
It’s time to interview Brackens.
Questions:
1. What questions would you ask? Conduct the interview.
2. What are your next steps?
Practical Problem 10
Ultimately, Brackens was fired. He would only admit that Lantern Co. was his company and
that if the others said he was being paid kickbacks, they were liars. When faced with a lawsuit, he
signed over his 401(k) back to the company. He is now a sales representative with Ad Sys who is
no longer a vendor with JMC. Harkins was not disciplined since she had disclosed that her
husband worked for a vendor. However, she was told in writing that she could never had anything
to do with that account and that her husband could not work on JMC’s account in any way. In
order to keep the business, Oak Hill also agreed.
Questions:
1. What would you put in your report to management?
2. What, if anything, would you not put in the report?
3. How would you prevent this from happening in the future?
