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Chapter 9 Case Study 1
Chapter 10 Case Study 2
Chapter 9 Case Study 1
Facts:
Mark is a young business student at the XYZ University, who works part time as a
financial adviser at a local credit union. Mark has been married a little over two years. Mark’s
wife is currently taking care of their newborn son, while Mark finishes up school. Mark is well
liked by all those who know him. In fact, those who know Mark would describe him as outgoing,
funny, and very intelligent.
At the credit union, Mark’s primary responsibilities are to set up new accounts, make
initial loan interviews, and work as a teller. While at work, Mark always appears to be working
hard and rarely misses work (even for vacations). Often times, Mark is the first one to volunteer
to stay late and look over accounts or help clean up.
Over the last four months, Mark’s credit union supervisor has noticed that Mark has
been making some interesting purchases. Four months ago, Mark purchased a big-screen
television and has frequently invited other co-workers to watch movies at his home. One month
ago, Mark bought three new wool suits, which he frequently wears to work. Two months ago,
Mark traded in his old Geo Prism for a new Jeep Grand Cherokee (with many expensive
features). When asked where he was getting the money for these purchases, Mark humorously
responded, “I guess people are right – when you die, you can’t take it all with you. However, it
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sure was nice they left it with me.” This was an allusion to the fact that a wealthy grandmother
had recently passed away and left Mark (her favorite grandson) a significant inheritance.
Also, the supervisor has recently heard some of the new customers complaining that
their balances are off by $20, $30, and even $50.
Issues and Analysis:
1. What fraud symptoms are present in this scenario?
Mark’s new life events, which put pressure on him, his unwillingness to take vacations
and time off, the expensive purchases, and the customer complaints about their balances
being off by $20, $30, and even $50.
2. Is it possible to know from the information above that Mark is committing fraud at the
credit union?
It is possible if customer complaints are investigated. As there are no major changes in
the figures and Mark also has valid reasons for his purchases due from money he inherited
from his late grandmother. Based on the information available for the changes in the
amount it is not possible to judge about commitment of fraud.
3. What is one reasonable the supervisor could do if he or she suspected Mark was
committing fraud?
If Mark was suspected of committing fraud in the company, it is advisable for the
supervisor to collect as much financial information about Mark from public records and
other sources. With this information, the supervisor can decide to investigate all the
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financial information using the net worth asset method to determine how much is the
amount of fraud or embezzlement.
4. Assuming that the credit union decides to investigate further, calculate Mark’s net worth
and income from other sources.
Assets
1996 Geo Prism $1,000
2008 Jeep Grand
Cherokee
$45,000 $45,000
Savings account 3,000 6,000 7,000
Checking account 600 800 500
CD 2,000 2,000 2,000
Laptop 2,500 2,500 2,500
Television 1,000
Total Assets $9,100 $56,300 $58,000
Liabilities
Auto loan 45,000 45,000
Total Liabilities $45,000 $45,000
Net Worth $9,100 $11,300 $13,000
Change in Net Worth $2,200 $1,700
Add: Living Expenses $1,230 2,130 2,230
Total Income $4,330 $3,930
Less: Known Income 1,300 1,300
Income from
unknown sources
$3,030 $2,630
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Chapter 10 Case Study 2
Facts:
It is early Monday morning, and Brian is preparing to conduct his first interview as a
fraud examiner. He is to meet with Sue, a laborer in the factory his firm is investigating. She is
neither a suspect nor thought to relate to the fraud. Her name simply came up in another
investigator’s interviews as someone who might be able to provide additional insight. They have
arranged to meet at Brian’s office, so he is simply awaiting her arrival.
“Hello,” he hears someone say through his partially open door. “I’m Sue.”
“Come in,” he replies, remaining seated behind his large, oak desk. She enters and takes
the empty seat across the desk from Brian. “Let me get right to the point,” are his next words.
“Are you aware of any reasonably credible or plausible evidence that the allegations of
embezzlement at your place of employment are tenable?”
After a brief pause and look of concern on Sue’s face, Brian asks, “Do you know what
embezzlement means?”
“Yes,” replies Sue.
“Okay, then, do you know anyone who has embezzled from your employer?”
“No.”
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Sue becomes nervous as she sees Brian begin to take notes on a pad. He continues,
“Specifically, have you seen Ralph perpetrating fraud?”
“No.”
“Are you sure? You know that this is a big deal,” he says as he stands and begins to pace
around the room. “I can’t imagine why anyone would steal from his own company, but he
deserves to be caught if he has. It’s wrong and bad, and only a horrible person would do
something like this.”
“I’m sure.”
“Have you embezzled?”
“No.” Sue states again.
“Well, then, I don’t see any reason to continue. Goodbye.”
Sue stands, excuses herself, and leaves the room.
Issues and Analysis:
1. What are some of the things Brian did wrong during his interview?
Brian did not introduce himself properly to the interviewee first, and he did not provide her
with the purpose of the interview. Also, it is usually best to conduct interviews at the
interviewee’s office so that they can access necessary papers, documents, books, and other
evidence. The interview room should be one free of distracts and in a private setting, where
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distractions are minimal. Lastly, Brian should have kept his note pad out of sight and discreet to
avoid making the interviewee nervous.
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