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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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You have just opened your own printing business. A large sports franchise is beginning an important advertising campaign in order to attract more fans to the sport. The purchasing officer of the company calls and asks you to make a bid on printing 5,000 high-quality posters that are to be given out to important boosters. He asks you to come by his office to talk about the job. There, he tells you that he would like to help you get started in your new business. He says that he has already asked for bids, and the lowest is for $25,000. He continues by suggesting that you come in with a bid for $24,000 and give him $500 in cash so that you get the bid. Your immediate reaction is to be flattered because you know that this could lead to many more contracts. You go back to your office and calculate your costs. You are pleased to see that you will make about $6,000 on the project, which you really need.

Required:

Is the deal suggested by the purchasing officer fraud? Explain.

To determine

Discuss whether or not the deal suggested by the purchasing officer is fraud.

Explanation

Fraud Triangle:

Fraud triangle is a model provided by Association of Certified Fraud Examiners. According to this model, employees can involve in fraud due to three reasons which are; financial needs, opportunity to commit fraud, and rationalization of fraud.

The deal suggested by the purchasing officer is essentially fraud. Here, purchasing officer has offered to receive bribe in exchange of forwarding the printing contract.

Purchasing officer has reduced the opportunity of other firms to be selected. Printing company has forwarded an even lower bid which may have resulted in profits for the sports franchise. Purchasing officer has benefitted himself at the cost of its franchise company...

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