Audit accounting unit 6
After reading Chapter 11 of your Forensic Accounting and Fraud Examination textbook, complete the following problems, which will help you apply your knowledge of the application of forensics to computer crimes:
Case 41 on page 353.
Case 42 on page 354.
41.Jackson Company manufactures pet supplies for birds and cats. Its top-level staff includes two accountants, a technology coordinator, a production manager, a warehouse manager, an office manager, two sales managers, two assistants, and the CEO. The company’s main offices and manufacturing plant in Los Angeles consist of an office building, a plant building, and two small warehouses. All buildings are connected via underground fiber optic cable. The servers, hubs, and routers are stored in the main office building.
The brain behind the IT network includes three server machines, named Washington, Jefferson, and Adams. The Adams server hosts the Mixta accounting system, which processes all internal and external accounting transactions in real time.
A recent audit by a regional accounting firm discovered six customer accounts that could not be traced back to real people. The auditors’ confirmations had been returned in the mail, marked Undeliverable and with Invalid Address stamps. To make things worse, all six accounts had been written off for nonpayment of amounts ranging from $4,200 to $7,000. The discovery was a complete surprise to Sandra Winger, the credit manager, because she always reviewed and personally approved all write-offs over $2,500. She was sure that she had not approved any of these.
Sandra called in Tom Surefoot, a local forensic accountant, to investigate. She was sure that fraud was involved, and she strongly suspected that Betty Beanco, one of the office managers, had somehow gotten into the accounting system and set up the phony customer accounts and had probably sold the written-off accounts on the gray market. Sandra was furious.
I don’t care how much it costs, Sandra told Tom. I want you to catch that woman. I’m not going to let her get away with robbing me like that.
How could Tom apply computer forensics and other techniques to determine whether or not Betty Beanco should be a suspect?
42. Julia Katchum is in charge of the Eastern Regional Counterterrorism Computer Forensics Unit. Her recent investigations led her to believe that an imminent threat of a terrorist act in the Chicago area exists. She did not know much about the attack except that at least four terrorists were involved, and one of them had just made a phone call from inside the main offices of Stevenson and Barnes International Accounting Firm. Her immediate task was to proceed directly to Stevens and Barnes with an eight-person tactical team including a counterterrorism field officer to apprehend the suspect.
Julia’s primary mission was to search the suspect’s office and home computers and find any information that could help thwart the attack. It was thought the attack could take place before the day was over.
When Julia and the CTU (counterterrorism unit) team arrived at the accounting firm, only the CTU officer went inside to avoid drawing undue attention.
Inside, the CTU officer surreptitiously spoke to the security guard at the front desk and asked to be escorted to the office of the head of security. Once there, the CTU officer used the building’s surveillance cameras to locate the suspect who was in the center of a very large room full of staff accountants working in individual cubicles.
The CTU officer decided against sending in the entire team and to make the arrest alone. There was too big a chance that the suspect could see the team coming at him because of his position in the center of the room. If he saw them coming, he could have time to delete valuable evidence or to notify other terrorists.
The CTU officer worked his way through the cubicles in as casual a way as possible, but when he got half way to his destination, the suspect seemed to identify him and began typing frantically on his computer. When the CTU officer realized what the suspect was doing, he ran the rest of the way and stopped the suspect by pressing his 10mm pistol into the side of the man’s head.
The CTU raided the suspect’s home at the same moment he was arrested. Just a few minutes later, the officer in charge of that raid delivered the notebook computer to John Dobson, CTU’s forensic accountant, as he was just beginning to look over the suspect’s computer in the Stevens and Barnes offices.
John noted the following facts:
The suspect’s office computer had open an instant messenger program. He could see a piece of a message written in Arabic.
The battery in the home notebook computer was warm, even though it was turned off and not plugged in when it was seized.
What approach should John take in examining the two computers? What are some specific things that he should include in his examination?
After reading Chapter 12 of your Forensic Accounting and Fraud Examination textbook, complete the following problems, which will help you apply your knowledge of the recovery process in an investigative audit:
Case 80 on page 382.
Case 81 on page 383.
80. Janet Markleson ran a profitable used-car business until the business failed as a result of an embezzling financial manager. The officers of the company were as follows: Janet was the president and treasurer, and her husband (now her ex-husband) was the secretary. All ownership equity in the business had been lost when the company’s financial manager cleaned out all the bank accounts, including one trust account whose balance was to be remitted to consignment customers. In all, the financial manager managed to run away with over $432,000 from those accounts. Rumors circulated that he had left the country.
The financial manager also cleaned out the company’s trust fund account that was being used to remit payroll taxes to the IRS and to state tax authorities. The loss in that account amounted to $74,221.54.
Janet hired a forensic accountant, whose final report clearly indicated the losses, although it only identified the financial manager as a suspect and not a guilty party. No guilty party was clearly identified in the report.
Janet’s husband, Mark Merkleson, never had had any involvement in the business. He worked as a salesman in a local department store, and after years of hard work he had managed to save up enough money to make a down payment on his first house, which he had planned to share with his new wife and raise a family.
Janet was bitter. Despite the forensic report the police wouldn’t seek an arrest warrant. She was told that even if they did prosecute, it would be impossible to get the suspect extradited from another country. She learned that extraditions can be expensive, and that local authorities didn’t have the budget to even pay the plane fare required to repatriate criminals in extradition proceedings.
About a month after the business failed, Janet woke up one day to find that someone had filed a complaint with the state revenue office, saying that she had stolen the payroll trust fund due to the state. She heard from a friend that it was the financial manager who had filed the complaint.
She tried to tell the criminal investigators from the revenue department that the financial manager had stolen the money. She showed them the forensic accounting report, but they seemed unimpressed by it and advised her that she was a target of a criminal investigation.
A few months later things got much worse. Her ex-husband Mark called her, furious, and told her that the IRS had just frozen his bank account, one day before he was supposed to close on buying his first house. He was close to crying, because his real estate sales contract had a clause that required him to close on time or lose a $10,000 deposit he had used as part of the sales agreement. So he was going to lose both his deposit and dream house.
Required:
Is there anything Janet can do to help her ex-husband? Why was his bank account frozen? Would it help if the financial manager were arrested?
81. Jason Blair is a CPA who has been asked to serve as an expert witness in a civil case involving theft of employee secrets. His client, Rexmem, has filed suit against its former IT director, alleging that the former employee stole proprietary information relating to Rexmem’s products, product strategies, and marketing plans and conveyed the stolen information to her new employer.
Rexmem intends to make its case by showing that the former IT director had access to the information in question. Furthermore, as soon as the IT director started working for her new employer, the employer began announcing new products that were identical to products that Rexmem had been planning to announce. Moreover, the competitor also began to run adverting campaigns that exactly matched those planned by Rexmem.
Jason has an extensive expert background in information systems and information technology.
How could Jason Blair prepare to serve as an expert witness?
What type of research should he do?
Is his IT background sufficient for a case that involves marketing issues?
