Question

You just been hired as a Fraud Examiner to investigate an employee of Ace Auto Supplies store suspected of skimming a percentage of cash payments made on a daily basis? The employee is a Parts Manager and is believed to be skimming a portion of all parts sales where cash is used as the method of payment. The parts are ordered by the customer and the invoice is generated, which is logged into the system. The parts inventory is adjusted based on sales entered into the system. The Parts Mgr is responsible for turning over all sales (cash, check, credit) to the cashier at the end of the day. The cashier reconciles the total sales for the day to the checks, cash and sales on credit. The cashier submits the paperwork to Ace's accountant who prepares a bank deposit slip and deposits the amount based on daily sales. There is also concern that the accountant is skimming cash before depositing the amount into the bank at the end of each day.

Prepare a memo to the Owner of the Auto Dealership covering the following:

1. Investigative steps needed

2. Evidence required to prove the fraud

3. List of interviewees

4. List some questions you would consider asking

Answer 1

Ace Auto Supplies

Memorandum

To: CEO,
       Ace Auto Supplies

From: The Investigator

Date: - 25/03/2019

Subject: - Initiating the Investigation Process.

After going through the complete matter, I would like to state that I need some more time to investigate the current situation more deeply so that correct measures can be taken.

There are a number of procedures which need to be followed for smooth flow of process –

1. I would like to check the books of accounts from journal to Balance Sheet.
2. I would like to check the bank statement of all the employees.

Evidence required to prove the fraud –

So, if the employee is stealing the money, then he/she might be depositing it somewhere or spending it which will be reflected in the bank accounts.

Also there will be a deviation in books of accounts from previous days which we will find out.

List of Interviewees –

1. Parts Manager
2. Cashier
3. Accountant

List of questions to be asked –

1. What is the average number of orders received on daily basis?
2. How many orders are you able to complete daily?
3. Why is not the Inventory amount matching with the sales amount?
4. Why is the Cash Flow decreasing without the decrease in sales?