Case Study (Set 1)

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Ramapo College Of New Jersey *

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ACCT-610

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Accounting

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Apr 3, 2024

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docx

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Jared Dimock Forensic Accounting Professor Pettit Case Study 1: What Is A One Cent Error Worth? Question: How can a one-cent error caused an IRS penalty? Is it not immaterial? The CPA, who had been in practice for more than 30 years, approved the reconciliation even though it was out of balance, which resulted in an IRS fine for the one cent error. Since the accounting company was also assembling the financial statements and tax forms, this ought to have been discovered. It is improbable that rounding will result in an inaccuracy of one cent. This would not be irrelevant in forensic accounting because a cent out of place indicates possible fraud. Since the bank statements are consistently accurate, it suggests that someone might be changing the books. Case Study 2: That Trusted Employee Question: How did this fraud occur? Discuss segregation of duties. Discuss opportunity in the fraud triangle with respect to this situation. Whether it is a mom and pop shop or a large corporation, segregation of roles is an important implementation that needs to be included in any firm. As jobs and responsibilities are divided inside an organization, segregation of duties can prevent potential fraud and error. In this scenario, fraud may have been avoided if Jim had someone approve the checks and someone else deposit the check. Jim ought to have put in place an authorization system as well. As a result, some actions can only be done with permission from one individual. Stacy shouldn't be permitted to deposit the check or enter the transaction into the system if she has permission to write the blank check. If Jim had established a dual signature method, the scam might have been avoided in another way. Checks over a particular amount would therefore require two signatures. Stacy would have been unable to write the checks to herself if Jim had used this kind of segregation of duties. Finally, Jim ought to have done the bank statement reconciliation himself or hired a third party who was not involved in the check and cash payments. Opportunity is one of the main three elements in the fraud triangle as people try to commit fraud when companies have certain faults such as bad internal controls weak accounting measures. However, it is feasible to prevent any prospective fraud by removing the opportunity to do so. There were numerous strategies that Jim's business could have used to stop potential fraud. Applying efficient internal controls, such as having preventative and detective measures, would have been one solution. If there had been a system of authorization and segregation of duties, Stacy would not have been able to write checks to herself. Creating a successful whistleblower system can also aid in the eradication of fraud. If someone in the energy service company in Baton Rouge did have a reliable method for reporting wrongdoing, perhaps another worker could have called in a tip if they had suspicions about Stacy's actions. Last but not least, creating a sense of impending punishment helps set the tone. Employees are less likely to violate policies and procedures if they are aware that they will be disciplined for even the tiniest infraction.

Case Study 3: Employee Fraud at Miami Rehabilitation Center Like fuel, air, and heat come together to make fire, the likelihood of fraud increases when the three elements of the fraud triangle come together. Analyze how the three elements of the fraud triangle are important and how all three elements were present in Helen’s case Like fuel, air, and heat come together to make

fire, the likelihood of fraud increases when the three elements of the fraud triangle come together. Analyze how the three elements of the fraud triangle are important and how all three elements were present in Helen’s case Like fuel, air, and heat come together to make fire, the likelihood of fraud increases when

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