Basilad, Howell Dagasdas, Chisum Pintac, Patrick Earl Almagro, Steven Marion

Cortez, Eric Anthony Du, John Daniel Untal, Joanne Canete, Joann Mae

Whodunit Case

A. If you were asked to help this company, could you conclude from the evidence presented that embezzlement took place? What would you do next? -You could be fairly certain that embezzlement had taken place. Unless it could be shown that the check had been received by the company and deposited into the companys checking account, someone working for the company had taken the cash. It appears that some accounting records had been altered. The accounts receivable listing had been ripped apart, which suggests someone might have run the report several times and pieced it together. - Our next step is to get a copy of cancelled check, bring it to the bank and determine if it was converted into cash. B. Who do you think was the embezzler? For us, the embezzler was Debbie because she had the accounting records, she admitted to occasionally using the incorrect address stamp (rather than the for deposit only stamp). She was working at the microcomputer and appeared to have caused it to the lose the accounts receivable file. In fact, she purposely trashed the accounts receivable file in order to hide evidence. She presented Susan with a deposit ticket that was not verified by the bank and did not add up to the correct total (indicating that the deposit was not processed by the bank). JOHN (Owner) had access to the cash, but not the accounting records, then TOMMY (Son) had access to the cash (only occasionally though) but did not have access to the accounting records. Lastly Susan, has both access to the cash and accounting records but shes the owner and shes the one hires the auditor so it seems like shes not the embezzler so it should be Debbie.

C. How was the embezzlement accomplished? The restaurants buying the crabmeat ordered the same dollar amount each week and paid weekly based on the invoice received when the crabmeat was delivered. As long as an account was current, no bill went out to the customer. Many of the other crabmeat processing companies in the town paid their workers with cash. Thus, it was not unusual for these companies to cash large checks at the bank, using the cash to pay workers. This is how she did it: Transactions: Debit Credit Sale# 1 $5000 Payment #1 $5,000 She kept payment #1 so she now needed to get the balance even by month end to avoid having bill sent to the customer. Sale #2 $5000. She never recorded Sale #2. By not recording the sale, she could apply the payment for Sale #2 to Sale #1 (to make up for the check she kept). Payment #2 Sale # 3 Payment # 3 Sale # 4 Payment # 4 $5000 $5000 $5000 $5000 $5000

Balance at month end

0 (so no bill sent)

Notice that: although she kept the $5,000 payment for Sale #1, by not recording the next sale, she was able to apply the payment for this second sale to Sale #1. Thus she was able to end up with a zero balance in the account at the end of the month. D. What improvements would you recommend in internal control to prevent this from happening again? In answering this question, try to identify at least one suggestion for each of the six classes of internal control activities discussed in this chapter (under the section Control Activities): transaction authorization, segregation of duties, supervision, accounting records, access control, and independent verification. We recommend the Access Control, because Debbie shouldnt allowed to have the access of both the checks and the records because she can easily manipulate it and allow her to steal from the company.

E. Would the fact that the records were maintained in a microcomputer aid in this embezzlement scheme? Yes, because Debbie should not or she will have a hard time to embezzle if it was not in the microcomputer because segregation of duties is difficult in a microcomputer and also she can easily manipulate the transactions like trashing the accounts receivables.