Question

Cal Smith Jr. is the night manager at a local doughnut shop that is doing very well. The shop sells doughnuts seven days a week, 24 hours a day. Cal runs the graveyard shift by himself because none of the other employees want to work at night. Since opening six months ago, Cal has not been able to find anyone to work for him and therefore has never missed one day of work. Cal makes his bank deposits every morning before going home.Cal feels that he is overworked and underpaid. The franchise owner, Kenny Jones, has praised Cal for his hard work and dedication to the company. Kenny’s only concern is that, once or twice a week, an entire batch of traditional glazed doughnuts has been thrown away because of overbaking. Despite these problems, Cal maintains a clean work environment and is considered a valuable employee.Recently, Cal has yelled at people on shifts before and after him for seemingly insignificant reasons. He was hired as manager because he gets along with everyone and is usually easygoing. His recent irritability could stem from the fact that business is slowing down, and he does not have much interaction with anyone at night. He also has been complaining that he has not been getting very much sleep. One day, Cal came to work in a new BMW, the car of his dreams. Cal said that his dad helped him buy the car.

1. What areas of the business are most at risk for fraud?

2. Identify any symptoms of fraud that appear to exist at the doughnut shop.

3. What steps could be taken to reduce opportunities for fraud?

Answer 1

Answer:

Requirement 1

There are three areas of business which are most at risk for the fraud:

1. It is only Cal Smith who works at the doughnut shop at night. There is no none other than him who wants to work at night, so he is no other option. He has not neglected a single day at work for the last six months since the shop opened. As a outcome of all these, Cal feels himself timeworn and poorly paid. The feeling of contentment is not there in him.
2. The monetary dealings are also at risk. Cal Smith, before going home in the morning, deposits the money. Since there is no one else at work at the doughnut shop during night, the entire monetary transactions rests on Cal Smith. There is a likelihood that he might make a fraud during the deposits he makes every morning.
3. Indecorous makings are also an area which is at risk in this business. Because of over-baking, the whole batch of traditional placed doughnuts are thrown away once or twice every week. This is also an area of risk

.Requirement 2

There are numerous indicators of fraud that look as if to exist at the doughnut shop, some of them are:

• Not getting any employee even after six months from opening of the doughnut shops. This has let Cal Smith to work on his own every night continuously for six months.
• He deposits the money every morning before going home. There is a possibility of fraudulent deposits also when everything is left for only one person to handle.
• Once or twice every week, all traditionally placed doughnuts are thrown away entirely because of over baking. This has been a repeated affair and there are chances that a fraud might happen in doing it so.
• Though Cal Smith was hired as a manager because he gets along with everyone and is usually easygoing but recently, it has been observed that Cal has yelled at people on shifts before and after him for seemingly insignificant reasons.
• Though he has explained that this has happened because he has not be getting much sleep at night and also there is no interaction with anyone while he works at night but the entire process can also be derived as post effect of fraud.
• The biggest example of fraud committed in the doughnut shop has resulted in Cal Smith, one of its employees buying a BMW M3 and taking it to work one day.

• Lifestyle symptoms: new BMW

  Behavioral symptoms: feels that he is overworked and underpaid

  Internal control weakness: lack of segregation of duties

Requirement 3

There are various steps which could be taken to reduce opportunities for fraud, some of them are:

• The doughnut shop can only operate during the day time.
• Hiring another manager other than Cal Smith.
• Giving Cal Smith a break in work to get back his original dedication and hard work.
• Having different people work different shifts.