Fraud Detection and Investigation: Micro Computer Consulting Services Case SolutionÂ
The Red flags that were present which might have triggered the presence of fraud are:
- The income of the manager was only $18000, yet he is being enjoying a luxury life, evidenced from his new sports car, expensive honeymoon vacation and along with these expenses the purchase of the new house.
- The unusual increase in the purchases for the computers.
- No formal policies and system for operations. Giving opportunity to commit a fraud.
- All powers vested to the manager, without segregation of duties as well as no reporting requirement. All transactions are authorized and executed by the manager.
- No check and balances, no internal control system and documentation.
- Lack of awareness about the store operations.
A typical fraud perpetrator has the following characteristic, all of which possessed by the MCS manager:
- The manager was living a prestigious life, spending more than he is earning.
- He is the dominant party of the store management.
- There were no internal controls and system work procedures.
- The manager was working from a long time and has great knowledge and experience which make him confident that the fraud will never be detected. As a result, this increasesthe fraudulent activities.
- The manager was married, thus he wants to make most to have better life.
- He was working in the same position, but did not receive promotion etc. which might have made him stressed.
The key points and element of the audit report will be included the Information about the fraud, a summary. The report shall state the auditing procedures used in making the investigation. Auditing techniques used and other related standards such as forensic auditing standards were applied. The evidences obtained and the description of the records investigated. Moreover, the areas where the audit procedures cannot be applied due to lack of information or documentation should also be included. It will also include the effect of such fraud on the financial statements as well as the significant factors involved and recommendations for addressing such factor.
The audit conclusion might be drawn in an opinion as what are the effects of this fraud and the recommendations on internal controls for preventing such fraud in future. It might also be stated in conclusion the limited investigation sources and the evidences obtained whether sufficient to support the fraud allegation.
The audit department should make investigation from the repair shop of the repairs services provided; much key information might be extracted. Moreover, the employees of the store should be inquired about this identified fraud. The Banker of the manager should also be approached to have a list of transactions made. Trace such transactions with the purchase or sales information of the store.
The university should have brought the criminal charges against the manager, since it misused its powers and has misappropriated the money that was to be used for the welfare of the student. The reasons other than the lack of sufficient evidence that might make the companies reluctant to initiate the criminal charges are:
- One of the main reasons that the company is reluctantbefore making the criminal charges against the fraudster is that this will result in the negative public image for the company. The company will have poor publicity and in this era of aggressive media the name of the company would be adversely publicized.
- Another reason might be that companies have their own internal discipline department that deals in such frauds. The company has self-maintained rules and punishments.
- Another reason that discourage to initiate criminal proceedings is Cost and time that might incurred in the proceedings. This will not only results in expenses for the company but also diverts the management time from the core business.
- The company may make private settlements and close the case.
- Another reason is the lack of cooperation from the alleged party as the alleged party might not be present or unreachable. Thus, this makes it difficult to gather evidence as well as confirming the charges………………. Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â This is just a sample partial work. Please place the order on the website to get your own originally done case solution