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You have recently been introduced to Laura Spencer, who is the Chief Financial Officer (CFO) of...

You have recently been introduced to Laura Spencer, who is the Chief Financial Officer (CFO) of a services firm that specialises in providing on-site technical assistance for computers and networks. Laura knows that you have recently obtained employment as a graduate forensic accountant and arranges to meet you over coffee. Laura brings copies of the company’s cash-flow statements to this meeting; after reviewing the financials, you note that cash flows have been decreasing for the last three years. When you query Laura as to reasons for the continual decrease in cash flows, she responds by saying “I just don’t understand why this is occurring; even though we seem to have more customers year-on-year, the cash doesn’t appear in our financials”. On hearing this, you inform Laura that you believe fraud may be occurring in her company. You suggest that cash collections should be the initial starting point for any investigation.

Required:

Explain how you would approach the investigation of the situation in Laura’s firm, and outline the investigation technique (or techniques) that would be best for finding the potential fraud in this case. (6 marks)

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