Summarise the key issues associated with the fraud
The key issue associated with fraud in the video is the lack of vigilance in the part of the directorate. The directors have the mandate to ensure that mechanism is put in place within the organization to avert misappropriation by the staff including analyzing accounting systems of the organization. Directors have the mandate of ensuring that all financial approvals are examined before they are authorized. The other issue is lack of vigilance from the board. The board has the mandate of ensuring that the actions of the directors are in conformity with the procedures set up by the organization. The other issues that are present within the case study include executive compensation, anti-bribery, internal investigations and cybersecurity. The executive compensation is a loophole that the directors of the organization have created to take up money of the organization.
The board needed to ensure that the directorate has no exclusive rights in setting their compensation. The directors account and enabling the directors to have the final say in the annual benefits that they ought to earn is an opportunity for them to fleece the company of their resources. Furthermore, the systems that the firm uses to store its accounting information and the transactions that are made is computer base. Such necessitated the need to have a precise computer use policy and cyber security policy within the firm. However, the management deliberately ignored the need to establish a cyber-security policy in the company. Such enabled the very directors to access critical information about the transactions made by the company through their proxies. The cyber security policy needed to ensure that the access to information within the system used by the firm could allow the directors to have limited access to information that is inly relevant to their work needs. However, enabling the directors to have qualified access to all the data of the company, instead of the exclusively relevant data is an opportunity for them to facilitate fraud in the firm. Ignoring the opportunity to outsource IT services for the company was a recipe for the company to expose its system to cyber-attacks, thus, jeopardizing the integrity of its systems.
Using the fraud triangle, explain why the fraud was able to be committed
The fraud was able to be committed in the because of pressure on the CEO from the board members. The CEO thought it would be best to make changes on the auditing firm but the members decided against it. The board members also opted for option two which included strengthening their IT system over a period of two to three thus giving room for fraud to take place. The first option which involved outsourcing the IT services was declined due to the huge financial impact it posed despite it being the best option at the time to prevent fraud. Option two was chosen despite the fact that have been several attempts to hack the companys IT system, thus predisposing it to more cyber risks which increases the probability for fraud to occur. There was an opportunity to commit fraud by the use of a supplier known as Premintel. Premintel was a supplier which was blacklisted due to its suspicious invoices. One of its founders was listed as the directors sister who at the time of its launch had already left the company. Even though the services of Premintel were stopped, there were still frequent payments made on its behalf which makes it fraud. Therefore, the director had the opportunity to commit fraud. Due to the lack of oversight and the changes that were going on in the company there was an opportunity to manipulate the services rendered and commit fraud. The final stage in the fraud triangle is the rationalization of the crime. The directors and the board were justifying their actions using the moral acceptable justifications. They tried to justify the fraud by stating that it was to be of the benefit of the company.
Therefore, the first apex of the fraud triangle, opportunity is the major source of fraud that was explore by the employees and staff of the company to facilitate the fraud. The rejection of the proposal to bring in an IT system that could have averted cyber hacking enabled the directors to understand that the system utilized by the organization was weak and could be exposed to cyber-attacks. Such could enable them to steal from the company and blame cyber-attacks yet the coordination of the supposed hacking was facilitated by the internal management of the company.
Motivation and pressure to engage in fraud is a crucial factor that is responsible for current situation. There is evident sabotage of the chief executive by the board members. While the proposals from the chief executive meant well for the organization, the board members were hell bent to have a system that they could easily manipulate and have their way. Subjugating the proposals of the chief executive brings about the appetite that the board members have for doing illegal activities, such as, awarding themselves money through cronies. The approval of Promintel as one of the suppliers despite having being blacklisted affirms the motivation that the directors had to bring about fraud within the company. According to the case study that has been presented, the management of Promintel has close association with the management of one of the directors. The motivation to commit fraud is driven by the weal internal controls in the form that could implement decisions made by the executive management, such as, not doing business with firms that have already been blacklisted.
Consider whether the auditors may have been negligent.
The auditors were negligent as they did not follow up on the Premintel dissolution and ensure that they track any other transactions that they could be using in the company. Failure to follow up on it left a loop hole that allowed for frequent payment for the bogus services. The auditors did not receive all the copies of required documents which they could verify the expenditures and transactions that the company was involved in. This enabled the fraudsters to use the opportunity to defraud the company. If the auditors ensured the documentation of the original receipts they would have discovered the fraud earlier and covered the gaps successfully.
Auditors not only look into the transactions but the authorization of the transactions that have been approved by the management of a firm. Therefore, there was need to request for all the minutes from the directors and the senior management that approved each supplier and the details of the contract between the supplier and the firm. If the auditors were diligent in their work, they would have made recommendations on the actions of some directors that needed investigation and further make proposals of how the loopholes that led to fleecing of the companys money could be sealed. Furthermore, the standard ethical practice of the auditors requires that they seek responses to the issues that they find out in the cause of their audit. Failure to grill the director associated with Premintel indicates the incompetence of the auditors.
Describe how the fraud was able to be committed. Include a diagram of the key companies and people involved.
According to the Australian Financial Reviews investigation into Plutus reveals that money to pay salaries to the recruitment company was sent from the government department to the recruitment company. The transfer of money from the recruitment company to the Plutus Payroll took place was then advanced to the Pays consultants after-tax wages. From the set of the final transactions, the Pays to ATO was advanced to proxy companies that was associated by some directors of Plutus. The diagram below depicts the companies and individuals involved in the fraud.
The diagram refers to the transfer of funds, especially those meant for the tax payments to tier two companies. The transfer of money to the straw directors was not the consultants pay for the free payroll services that they offered but rather an opportunity to rip off the government of the tax dues that ought to have been paid by the company. The cash flow is an intricate policy that called for the intelligence of the investigative officers to unearth the crime. The payroll from the client companies landed into Plutus Payroll Australia. From there, Plutus received a percentage that led to ATO experiencing losses to the commonwealth. Additionally, the role of the co-conspirators complicated the financial transactions but linked the straw directors into the fraud and crime detected. There were two financial transactions between Plutus payroll Australia and the co-conspirators. The co-conspirators and the also have two way transactions with the second tier companies with the straw directors involved in some transactions. The money that landed into the second tier companies was then sourced out in three sources. PAYG from the second tier companies landed into ATO. The payroll funds were directed to the client companies employees and the other loophole of funds was directed to the second tier percentage. The second tier percentage was then directed as ATO loss to commonwealth.
Using the fraud triangle, describe the circumstances that allowed the fraud to occur. Include Adam Cranston and at least one other person in your analysis.
According to the Fraud triangle, the major motivating factor that facilitated the fraud was opportunity. The staff at Plutus had access to the payment systems and could manipulate the information that was stored within the system. The directors had the ability to also conceal the information that was stored within the system and such enabled them to erase the trace of evidence from being assessed by the auditors. The level of access to information and payment systems within the organization needed to be limited to ensure that there are minimal chances of fraud within the organization. The other aspect of the Fraud triangle that is in relation to the Fraud triangle is the motivation and pressure to engage in Fraud. Despite the pay that the Plutus managers received, they had an equal motivation to take more financial resources from the firm, an affirmation of high level of greed.
List the evidence that has been obtained in an attempt to prove the fraud. Is there any other evidence or analysis that should be obtained or performed?
The major evidence that obtained was the analysis of lifestyle of the director, particularly Adam Cranston. The conspicuously wealth that he suddenly gained and the immediate change of lifestyle led to investigators to establish his probable source of wealth. Such led to the investigation into the financial traces that he has held. The other overwhelming evidence was the reason for Simon Arguentis continuing to manage SYNEP limited despite selling it in 2014. The other evidence was in relation to the conversation between the directors and the lawyers on the role that they had to play in the scam.
As a forensic investigator consider and then list the two (2) final steps you need to undertake to finalise your case for submission to a court of law, ensuring that you comply with APES 215.
The first step that needs to be undertaken is determining the conflict of interest that is existent amongst the directors. The conflict of interest could lead an investigator to determine the motivation of any leader to commit any rime. The next stage of investigation as is aligned to APES 2015 is professional competence and due care. Professional competence would enable an investigator to determine if there is any error in their work or if there is an opportunity for the director to swindle money from the organization. Therefore, the minutes of the firm and the financial approvals of the organ...
If you are the original author of this essay and no longer wish to have it published on the collegeessaywriter.net website, please click below to request its removal:
- Paper Example on Business Portfolio Tasks
- Utilitarianism and Ethical Egoism - Comparison Essay Sample
- Course Work Example: The CIO and IT Leadership
- Capital Punishment is Unfair - Essay Sample
- Historical backdrop of Marbury v. Madison - Paper Example
- Legal Case Review: Paula Smith-Adams Against Fairfax County School Board
- You Have Almost Been Hacked - Essay Sample