Question

Compose a case or (make up) a case where all of the elements of the fraud triangle are evident!

Question 3 asks to explain what is wrong with the statement below. What kind of suspicous activity do you see? PLEASE HELP!!

Question 2 (20 points) Compose a fact pattern or scenario or case whereby all of the elements of the fraud triangle would be evident Question 3 (20 points) Q1 Q2 Cash $1,000,000 $200,000 Accounts Receivable $ 500,000 $500,000 Inventory $1,000,000 $1,000,000 Property. Plant E $5,000,000 $6,000,000 Long Term Debt $10,000,000 $10,000,000 Line of Credit $0 $1,000,000 Sales Revenue Gross $5,000,000 $8,000,000 Please discuss - What's going on here? What concerns do you have? What examination procedures will you undertake?

Answer 1

2. In 2020, Jose Mourinho was sentenced to 30 months in federal prison and ordered to repay $367,508 in restitution to the Football Association of Spain (FAS). Mr. Mourinho had been the accountant for the FAS. He was hired in 2011 after FAS’s previous bookkeeper was fired for embezzling money.

OPPORTUNITY

Little is known about the embezzlement committed by the bookkeeper previous to Mr. Mourinho, other than after he was dismissed, internal control was reviewed and strengthened to prevent future losses. Mr. Mourinho became acclimated to her new responsibilities and procedures, and proved to be a competent and trustworthy employee. As his tenure lengthened, he was given more responsibility and oversight of his responsibilities was decreased. Procedures established after the previous embezzlement were relaxed as confidence in Mr. Mourinho’s abilities increased and as a friendship between his and the CEO developed. He eventually became responsible for nine bank accounts and either was given, or assumed, authority to write and sign checks, including payroll checks, and make deposits.

PRESSURE

The Pressure side of the Fraud Triangle is defined by the Association of Certified Fraud Examiners as “perceived unsharable financial need.” Investigators soon discovered that Mr. Mourinho had a gambling addiction that started with video poker then escalated to on-line gambling when Spain outlawed video poker in 1999. The association funds were diverted into Mr. Mourinho’s personal bank account and from there, funds were wired to off-shore gambling payment processors.

JUSTIFICATION

Justification is what the embezzler says to herself that makes it okay to steal. Some embezzlers justify their actions by convincing themselves that they are being mistreated by their employer and deserve the stolen funds. Others steal because they rationalize that the consequences of stealing are better than the consequences of not stealing. No one, however, counts on getting caught. Mr. Mourinho used the funds he stole to feed her addiction and didn’t appear to be motivated by retaliation. He was contrite in her confession and sentencing. I do not know, how he justified to himself the theft of these funds.

THE FALLOUT

In addition to spending time in prison, and having to pay restitution, Mr. Mourinho will carry the burden of being a convicted felon for the rest of his life. No one but he knows the effect this will have on her children. The FAS will likely never recoup all of the stolen funds. In comparison, mentioning lessons learned and the importance of controls seems trivial. There may be no silver lining.

3. It appears that the quarters financial data is presented here.

In the data, it can be seen that Cash has reduced from $1,000,000 to $200,000, that means that the fund has been appropriated somewhere. While there are no changes in the Accounts Receivable, Inventory, PPE has been bought through line of credit of same amount. The Long Term Debt also stays at the same level. Therefore the reduction of cash of $800,000 is not justified. With the increase in the Sales/Revenue Amount the suspicion has increased. The Funds of the business might have been use for personal or non business purposes.

One should verify the cash and fund flow statement for the concerned period of the business to check if any misappropriation of the funds of the business has been made.