Question

Sue is a customer account representative for ABC Company. She recently acquired several new accounts when a previous representative, Dan, took an early retirement. Sue reviewed each of Dan’s accounts to help familiarize herself with his clients and under- stand how she can better serve each one’s individual needs. As she was reviewing the client list, she found a major customer she had never heard of before. Surprised that she had not yet done business with the company, she called it to introduce herself as the new representative. When Sue placed the call, she found that the reported number had been disconnected. Thinking that the customer may have done business with ABC in the past and have moved on, she reviewed the account transactions and found that the most recent transaction had taken place the week prior. During her review, she also noticed the latest transaction was for an unusually large amount for ABC. As Sue pursued her curiosity, she went to other employees to find out more about the company. In her questioning, she found that none of the employees had ever heard of the customer. Once she had run out of other avenues, Sue decided to contact the controller to find out if he could provide any additional information. When Sue opened the company directory, she was amazed  when she recognized his home address: it was the same address as the mystery customer!

1. What are some of the possible scenarios for why the addresses match?
2. What other symptoms would be present in each of the scenarios you identified in part (1)?
3. What are the implications of the address match if the company is private? If the company was pub- licly traded?
4. Assuming the company was preparing for an IPO, who should Sue contact, and what should she say? 5. If Sue believes these revenues are fictitious, what
should her next course of action be?

Answer 1

1 What are some of the possible scenarios for why the addresses match?

Dan the retired representative might be responsible for the fictitious customer.

The controller had the same address as the fictitious customer. He may be colluding with other members of the

company staff to defraud the company.

A fraudster is using the controller's phone number and a fake customer to defraud the company.

2. What other symptoms would be present in each of the scenarios above?

The mystery customer's phone is disconnected. This may Dan's work: setting up a fake customer, setting up a

fake phone number and having it disconnected and committing fraud by generating fictitious transactions to

embezzle the company's money.

The fraudster may be expected to generate fake transactions with the mystery customer with a view to

committing fraud/embezzlement.

Dan/the controller may be colluding with each other and/or other staff to defraud the company.

3 If the company is a private, this may be an attempt by some of the shareholders to defraud the company for their

private benefit or to gain control over the company.

If the company is publicly traded, this may be the attempt of a competitor to bring down the market value of

shares of the company on the stock exchange.

4 If the company is preparing for an IPO (Initial Public Offering), Sue should contact all parties who are going to

underwrite the public offering. She should say that she suspects someone in the company or someone in

collusion with someone in the company has committed or is about to commit fraud. She should mention the

mysterious customer she discovered. She should say this so as reassure the underwriters. If Sue believes that

these revenues are fictitious, she should recommend legal action against Dan, the controller and anyone else

colluding.