The following is a case analysis of Capstone Tallahassee Bean counters. The investigations will focus on a period of May and September when there was construction facility and fraud occurred. The first part of the case study will identify the red flags and the persons who are likely to be the suspects in this investigation. We shall also look into places and instances where those internal controls are weak and who are likely to be in a position to exploit such weaknesses. The third part will describe how one may perpetrate fraud in Bean Counters due to the shortfalls in their financial processes. The fourth part of this case study is a description of the additional materials, which are required to make the investigations successful without tipping off the suspects that there are investigations. It will also include letters to entities outside Tallahassee Bean Counters requesting them to provide additional materials that will be of help in making a certain conclusion as well as getting additional evidence against the suspects.
Red Flags in the Company
The first part of this case study will delve into the red flags in this company, which are likely to lead to fraud activities. Notably, the owner of the company runs the company in an informal manner such that for a long period there has been no external audit of accounts. Kennedy the owner of the company then goes on to say that audit is necessary when applying for a bank loan but not for any other reason.
This gives the employees a chance to manipulate the figures and accounts because they know that no one will discover their actions. Auditing is a means of reconciling the accounts with reality. It raises a red flag in gray areas that can result in fraud because there is no accountability. In addition, the fact that Kennedy himself does not scrutinize the accounts of the company and he has entrusted the president with the overall management of the Bean Counters is another red flag.
The other loophole may certainly give an occasion to the emergence of fraud activities in the Tallahassee Bean Counters. The fact that the president has left all the activities of office management to the office manager may also allow fraud in the office. The discussions between the women at the ticket counters indicate that the president of the company has delegated the work to the office manager especially during the construction of the state-of-the-art training facility.
Another red flag is that the team manager Tucker Johnson does not do paperwork; he thereby leaves all the paperwork to his assistant. The assistant looks into the inventory and makes the new orders; he verifies the orders that have arrived. This occasions chances of fraud because the individual has a lot of control in the process of requisitioning and receiving the merchandise. The individual can indicate that the product is finished in the inventory though it is there; he is the supervisor and the clerk.
The office manager is also involved in the collection of revenues in the car park; he is the supervisor of the car park revenue and fills in the inventories as well as going to bank the money, which occasions a chance for fraud to occur, as there is no accountability mechanism to countercheck this individual.
Finally, concerning fundraising there can be a fraud as the president who is in charge of fundraising does it alone and only takes back the money which has been raised at his own will. There are no proper inventories to indicate the money collected from the fundraisers. It is also worrying that the assistant to the president is his niece giving the president a room to collude with the relative of a fraud.
The Suspects
The first suspect, in this case, is the president of the company Phil Ackers, especially concerning fundraising and donations. This is because as earlier stated the president attends the fundraising activities alone and there is no mechanism to indicate what the president has raised. The money from the fundraisers is a result of his confessions or his conscience but no one can prove that what he has indicated in the inventories are the actual amounts of funds that have been raised. The other source of income that could have provided money to the president is the training facility. The fact that he was the one in charge of the facility without the further mechanism of accountability may certainly have availed instances of fraud. The owner of this enterprise seems to overtrust his staff such that he does not avail means of auditing the firm’s operations.
The other major suspect is none other than the office manager who has a lot of control in the company because of being in charge of office operations. As earlier stated, Ben Hill is the office manager and he is in charge of supervising the car park revenue collection. He is the one who makes the entry in the inventory after counting the money. He is also the one who takes that money to the bank. Observations from the case study provided indicate that there are one thousand five hundred parking spaces that are at a time full yet the total revenues collected is indicated to be two thousand. He is the one who collects and ascertains the slots and the receipts issued at the entry may not be taken as a fact unless all the space coupons for the day are availed. This one individual requires further investigations; more information is required on the number of parking slots sold and the amount entered in the inventory.
Julie Roper is another suspect of fraud in this company, especially fraud to do with the ticket sales. She is the one who is in charge of selling the group tickets; she is also in charge of making the final entry on the tickets sold and forwarding the sales record to the manager. The group tickets for May vary with the entry in the journal for ticket revenues. Unless she produces the actual number of tickets sold, she is still a suspect. The way she overworks herself to fill the inventories is also suspected, she may be having an agenda to make inventories in collusion with the manager who takes money to the bank in fewer amounts.
Apart from the revenue collection, the clerk called Sam is another suspect. Tucker Johnson the team manager has delegated all the paperwork to this individual such that he is the one who determines the equipment bought and receives the equipment. This gives the individual a chance to defraud the company by stealing some of the equipment by providing figures, which are not in tandem with reality.
Lacking Internal Controls
The company is devoid of proper internal control mechanisms that are vital in preventing fraud in an organization. The first internal control is that Tallahassee Bean Counter does not have an accountant. There is no one in the company whose sole responsibility is reconciling accounts and making the necessary follow-ups on the expenses as well as the revenues of the company. Lack of accountants creates loopholes and occasions of fraud.
The other internal control, which is deficient in this company, is that of the proper job description. It states the responsibilities of each individual to avoid instances where members of staff are doing activities that are not acceptable. For example, the way Ben Hill supervises the car park and makes inventories though he should not be the one who is doing this work. Proper job descriptions create responsibility for the tasks assigned as it makes the person in charge of those tasks answerable.
Failure to have reliable audits done regularly is another internal control that is making fraud prevail in this organization. No one can tamper with the accounts when they are fully aware of an audit in the firm, which will demand the receipts and other documents that support any particular transaction.
How one can penetrate fraud
Based on the information obtained from Bean Counters 1 can perpetrate fraud in this organization in various ways. One is through the ticket sales where one would sell the tickets without ticking on the computerized system to indicate the sale. In addition, one can enter fraudulent figures of the total sale of tickets if there is no one to reconcile the number of tickets sold and the amount entered in the inventory. To make this easier and to cover it up there will be an agreement between the ticket sellers not to include a certain amount of tickets sold on the automated computer records. This means that there will be an excess amount of money that is not recorded in the inventory and the company will have no means of tracing it.
The car park is another area where fraud can exist by recording a lesser amount of tickets sold in the inventory also by failing to issue receipts to some of the cars parked especially if the owners are in a hurry and they do not have time to pick the receipt after they have paid. Notably, the car owners do not get the receipt; rather stickers are used. It is, therefore, possible for the car park person to take the money and not stick the receipt on the car.
Required Additional Materials
The following is the additional information that is required to ascertain whether the suspects are guilty or not. The first information is about the receipts issued on the number of cars in the parking lot between May and September, the security person in the car park may have information on whether the car park was full or not. The other additional information required is for the number of tickets sold from the computer and the number of tickets recorded in the inventory. The other additional information required is the number of trips made by the presidents to fundraise and the amount of money collected from such fundraising activities.
Letter requesting additional information
The following are the letters requesting additional information:
The Security Officer Bean Counters Car Park,
Please provide the details of the number of vehicles that entered the car park during May and September to assist in tracing a vehicle, which got lost and was in the car park during those months.
Yours, Dugan Smith
Private investigator.
To get the President’s trip details
Myrna Myers
Please provide the details of the number of tickets sold in the field especially the remainders of the cutouts of tickets sold between May and September to assist in auditing the firm’s inventory.
Yours Dugan
Private investigator.