Fraud in Purchasing. Consider the following scenario:Adam worked for the local hardware store as an outside sales representative. His job wasto visit local companies and contractors in an attempt to identify their needs for tools andmaterials and provide a bid to supply those items. When a local contractor accepted a newjob, Adam would get its material requirements, come back to the store, and prepare and submit a proposal for the items. After some initial success with Big Builder, a large contractor,the number of jobs awarded to Adam had decreased dramatically.One day, Adam was back at the store after losing a bid to Big Builder when he noticedsomeone in the store purchasing the exact items and quantities that were in the specificationfor that bid. The combination of items was unusual, and it would be an unlikely coincidencefor someone else to want such a combination in that exact quantity. The customer paid theretail price for the merchandise and left.Adam decided to contact Big Builder, but he knew he could not do so and make anyaccusations. Adam set up a meeting with the president of Big Builder and inquired as tohow Adam might “increase his business and better meet the needs of Big Builder.” Eventually, the recent bid entered the conversation. Adam showed his copy of the bid to thepresident. The president retrieved a copy of the purchase order and recognized that theamount on it was more than the bid Adam had submitted. The company that submitted thebid was K. A. Supplies Inc. Adam had never heard of K. A. Supplies and noted its addresson the purchase order. The president of Big Builder promised to investigate the biddingprocess.Adam drove to the address of K. A. Supplies and found a packaging and shipping storeat that address. Furthermore, Adam went to the county courthouse and inquired about K. A.Supplies. The company was listed in the county records, and one of the purchasing agentsfor Big Builder was listed as an officer.Required:a. Given the information that Adam knows, what do you believe is occurring at Big Builder?b. What other information would you want to obtain, and how might you retrieve thatinformation?c. What controls might be instituted at Big Builder to prevent improprieties in the biddingand purchasing process?
Fraud in Purchasing. Consider the following scenario:
Adam worked for the local hardware store as an outside sales representative. His job was
to visit local companies and contractors in an attempt to identify their needs for tools and
materials and provide a bid to supply those items. When a local contractor accepted a new
job, Adam would get its material requirements, come back to the store, and prepare and submit a proposal for the items. After some initial success with Big Builder, a large contractor,
the number of jobs awarded to Adam had decreased dramatically.
One day, Adam was back at the store after losing a bid to Big Builder when he noticed
someone in the store purchasing the exact items and quantities that were in the specification
for that bid. The combination of items was unusual, and it would be an unlikely coincidence
for someone else to want such a combination in that exact quantity. The customer paid the
retail price for the merchandise and left.
Adam decided to contact Big Builder, but he knew he could not do so and make any
accusations. Adam set up a meeting with the president of Big Builder and inquired as to
how Adam might “increase his business and better meet the needs of Big Builder.” Eventually, the recent bid entered the conversation. Adam showed his copy of the bid to the
president. The president retrieved a copy of the purchase order and recognized that the
amount on it was more than the bid Adam had submitted. The company that submitted the
bid was K. A. Supplies Inc. Adam had never heard of K. A. Supplies and noted its address
on the purchase order. The president of Big Builder promised to investigate the bidding
process.
Adam drove to the address of K. A. Supplies and found a packaging and shipping store
at that address. Furthermore, Adam went to the county courthouse and inquired about K. A.
Supplies. The company was listed in the county records, and one of the purchasing agents
for Big Builder was listed as an officer.
Required:
a. Given the information that Adam knows, what do you believe is occurring at Big Builder?
b. What other information would you want to obtain, and how might you retrieve that
information?
c. What controls might be instituted at Big Builder to prevent improprieties in the bidding
and purchasing process?
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