In: Accounting
MAXWELL AND COMPANY: STAFF AUDITOR EMBEZZLEMENT AT A SMALL CLIENT
Accountants have the responsibility to perform quality services with integrity, objectivity, and professionalism. Accounting firms have the responsibility to hire and monitor competent personnel, so they can fulfill their assigned responsibilities.
a. What mistakes, if any, did Max & Co. make in hiring Anna and supervising her at Rusher Automotive?
In the case of 'Maxwell and Co. : Staff Auditor Embezzlement at small client', Maxwell & co. was a local accounting firm wherein it hired Anna Thomas as a staff auditor who was deployed on a small client called Rusher Automotive to perform bookkeeping and tax preparation services there. She was fraudulently using the client’s credit card to make personal purchases and had obtained large cash withdrawals from the client’s credit card over a period of approximately two and a half years. So, the major mistakes made by Maxwell and Co. in hiring Anna and supervising her at Rusher Automotive is outlined below :
1. Lack of Background Check : The period in which Anna Thomas was hired did not let Maxwell and Co. to properly check her resume for references and perform the background verification. Therefore, checks and procedures normally used in hiring new employees were not practiced. The immediate needs of the firm were placed over the quality and credentials of the job applicant. Additionally, She was the daughter-in-law of a prominent and well-respected local attorney. All this led to missing out the very crucial background check. A thorough background check including credit checks, employment history, and peer references may have put a “red flag” for Maxwell and Co. to seek another available candidate and avoid this mishap.
2. Lack of supervision on Anna at client place : Anna was deployed to perform bookkeeping and tax preparation services at Rusher Automotive. Rusher’s trustworthiness and non-segregation of duties for Anna, combined with the lack of company internal controls allowed Anna the opportunity to perpetuate the embezzlement. Had, Maxwell and Co. deloyed regular supervison with the help of senior staff/ firm's partner, Anna could have been caught or may be she could'nt have gathered the couage to commit the fraud. She was trusted blindly by the client with their finances. Her supervisor could have warned the client that risk of fraud could be drastically reduced by ensuring proper work segregation and SoD.
Hence, mistakes from both the firm and client gave Anna the opportunity of commiting fraud.