Question

Diana is a college graduate with accounting as her major and is planning to take the CPA exam. She recently accepted the Staff Accountant’s position with the ZZ Cinema Franchise. There are 20 theatres that are owned by the Franchise in a widely spread geographic area. John is manager of all the locations of the theatre franchise and William, distantly related to him, is the Assistant Manager working solely at his location. Jodi sells tickets from a glass cage and collects the cash from patrons. At the end of the last show, he adds up the cash receipts, reconciles his sales and hands over unsold tickets and cash to William. Bob, the doorman, collects the tickets from incoming patrons, tears the tickets into two, hands over one to the patron and drops the second half into a little locked box which William picks up at the end of the day. William prepares the bank deposit slip, deposits the cash in the bank, and keeps the bank receipts and the unsold tickets in the office safe to which he has the only key. William also prepares the bank reconciliation statements and submits weekly sales reports to Diana. Of late, William has volunteered quite frequently to speed up ticket sales on crowded days by working Jodi’s station at the sales counter. John has not objected to this practice. During the past month William has been seen driving a fancy new Lexus to work and seen dining with an attractive blond at the town’s expensive restaurants. Diana finds from William’s reports that sales have shown no change from previous weeks, even though there appears to be an obvious and significant increase in movie theatre attendance during the summer season. This puzzles Diana, who suspects this apparent discrepancy is being pocketed by William. More puzzling, why hasn’t John also noticed this problem? Diana wonders if she should report her suspicions to someone in authority. After all, she has no proof. More importantly, should she go to John? He might be involved in this possible scam. What should she do?

Answer 1

As Diana feels that there is some fraud going on in the organization, and she is suspecting William for that, she should report this to the manager, Mr John.

She is also suspecting if he is also involved in the case. In this situation, she should convey the matter partially to John and see what is his reaction. If he tends to ignore the matter or tell her to remain away from all these, this would be very clear that he is also involved in this. And this case if John is taking no action, Diana should go to higher management and complain about this.

Yes she does not have any proof but she could urge the management to look after the sales of ticket to some other person, so that if any fraud is being done by William and John, it would stop.

One more step which is very important to be taken is that work should be not entitled totally in one hands. A particular work like if William is doing collection of bank receipts then someone else should be making bank reconciliation in order to have a check that no manipulations are being done.

If all the works are done by a single person without the interference of any other, that person can easy make manipulations and there are chances of fraud.

If the work will be divided among people, one will have a check on activity of the other and hence it will be difficult for someone to commit fraud.

Diana should suggest this idea to the management. And if William is found guilty. He should be punished for doing fraud with company.

Having no proof and hence not telling the organization would not be a right step. Whether she is assuming right or wrong, it is her duty to tell the management regarding this, I'd she is working in an organisation. This is an ethical behavior. Not telling the management regarding this can lead to a huge loss occurring to the organization.