1.

What would have motivated agents and executives to commit bribery and make
corrupt payments to government officials?

The fraud triangle contains three elements that are common in perpetrating fraud: pressure, opportunity
and rationalization. Pressure is the element that is most similar to motivation and can be divided into
four main groups: financial, work-related, vice and other. Financial pressure and work-related pressure
appear to be the most likely pressures and motivators with the bribery scandal and the corruption. With
financial pressure, this can include the fear of not meeting sales goals/expectations. For work-related
pressure, this can include the pressure to meet job performance expectations. If the Company’s
products were not selling well in target markets, this can be a strong motivator in committing bribery
and corruption because it would affect sales goals and job performance expectations. Opportunities to
commit fraud are common in organizations that have insufficient internal controls. The Company’s
weaker control activities such as lack of supervision, poor documentation process, poor procedures for
authorization, and independent checks on performance created opportunities to commit fraud. The
Company’s employees took advantage of poor internal control structure and booked bribes as
marketing and promotional expenses and executives covered their bribes for years by creating falsified
receipts for imaginary expenses. Also, management philosophy and operating style allowed employees
to continue fraudulent activities within the Company. Rationalization, such as “I haven’t received a
raise” or “It’s only a loan; I’ll pay it back”, it’s very clear that agents rationalized their behavior
through whatever means and continued to behave in this manner. It was intentional, surgical, and
completely malicious. Obvious that they had no intent of stopping.

2. What investigative skills/fund of knowledge/other technical expertise would be

needed to resolve a case like this?

Following are some key skills and technical expertise that would be needed to resolve a case like this:

1) Accounting and Auditing Knowledge:

Based on facts presented above, accounting and auditing knowledge would play a key role in
resolving a case like this. The investigator should be able to review the financial statements and
trace back the information recorded on financial statements to various source documents. This
would help determine the amount involved in fraud.
2) Use of Technology:
Technological advancements have made it relatively easier to conceal fraud. An investigator
would need to possess reasonable technological knowledge to be able to follow data trail, review
evidence and conduct forensic investigation. With the use of forensic imaging, an investigator
would be able to review clients’ systems and look beyond the files that are live in the system.
Some technological tools aimed at enhancing internal controls can also help in preventing future fraud
schemes.
3) Communication Skills:
A person in charge of resolving a case like this should have excellent communication skills. The
investigation would require interviewing the named fraud perpetrators and other key players in
the case to gather all the facts and details necessary to determine the extent and nature of fraud.
4) Knowledge of Relevant Laws and Regulations:
While sound knowledge of domestic laws is very important, understanding foreign laws and
regulations in resolving a case like this would go a long way. Considering the fact that other
parties involved in this case are government employees, extensive knowledge of local laws and
regulations would immensely help in evaluating the impact fraud may have on a company's prospects.

To perform this investigation, fraud examiners need to be able to obtain evidence, report and analyze to
findings, testify in court if necessary, and assist in fraud detection and prevention.

3. Develop a mini fraud risk assessment. Given the company is cost conscious.
(Procurement Process)

A fraud risk assessment generally includes three key elements:

1. Identify inherent fraud risk: Information obtain from the population of fraud risks that could apply
to the organization. The motive of the Fraud Includes:
A. Opportunity: Rory has been promoted to Lead Service Technician and in addition to his former
duties, he is YourTech’s procurement manger, this provides him with the opportunity to procure
equipment, approve them by himself and forged receipt.
B. Incentives: Based that Rory has his own website O-Zone page, and his belief is quoted on his
webpage stating “If everything seems under control, you’re just not going fast enough” by Mario
Andretti. Rory has the incentive to use his opportunity to get quick and fast money.
C. Rationalization: Since there is no third-party approval, Rory Orders Purchase request send to
Howard representative which is George (Rory friend), Rory approves the order, Rory receive the
order and delivers it to appropriate technician. This provide Rory with rationale to submit forge
invoice and also very certain that he can’t be caught because he runs the whole process.

2. Respond to reasonably likely and significant inherent and residual fraud risks: In order to decide
what the response should be to address the identified risks and to perform a cost-benefit analysis of
fraud risks over which the organization wants to implement controls or specific fraud detection
procedures. There are three general categories of fraud risk: fraudulent statements,
misappropriation of assets, and corruption:
1) Intentional manipulation of financial statements/ invoice [fraudulent statements], which can
lead to:
a. Inappropriately reported revenues: Based on their purchase order and invoices, they can
by misled of their revenue due to procurement fraud.
b. Concealing unauthorized receipts and expenditures: Based on the database of all purchase
orders, it can be clearly seen that fraud perpetrators gave false information on some
procurement orders they made and gave forge receipt.
2) Misappropriation of Assets by:
i) Employees.
- Creation of false orders, and shipment to personal address, fictitious and unknown suppliers.
- Changing names of procurement orders in the invoice
ii) Employees in collusion with vendors
- Created fictitious invoices approved by George Smith Howard Sales Representatives.
- Sent email to George Smith in a familiar tone [“if its too much, don’t worry about it”] and
[“Have them dropped off at the holding location in Takoma Park”] in such a way that indicate
that George smith have full understanding of “holding location” and the sense of the statement
indicate that the procurement fraud wasn’t new to George Smith.
IC Weaknesses (19 weaknesses)
– Segregation of Duties
– Receiving email, recording purchase order and performing bank reconciliation
– Authorizing procurement purchase order and recording transactions
– Managing employees shift and yearly change in sales representative
– No Internal Audit
– No periodic assessment of the quality of internal control by BOD
 Control Suggestions:
– Establish adequate separation of duties
– Independent bank reconciliations
– Create approved vendor lists and management ask for quotes
– Management should become more involved in day-to-day management
– Internal audit committee
– Adopt a club/employee code of ethical conduct
3) Corruption including:
a. Theft of assets: Fraud Perpetrators made Procurement Fraud for them to sale the purchase
order at TheBay online.
b. Conflicts of interest: This were purchases that could increase the revenue & growth of
YourTech but rather Rory made them increase his own wealth.
 3. Assess likelihood and significance of inherent fraud risk: To assess the relative likelihood
and potential significance of identified fraud risks based on historical information, known
fraud schemes, and interviews with staff, including business process owners. Management
must evaluate the potential significance of those residual risks and decide on the nature and
extent of the fraud preventive and detective controls and procedures to address such risks.
A. Likelihood of Occurrence is reasonably possible since Rory is the Lead Service
Technician as well as the Procurement manager for YourTech.
B. Significance to the Organization: The Procurement fraud more than significant to
YourTech as it leads to reduction in the company revenue.
C. People and/ or Department Subject to the Risk: There is a need for internal control and
third-party approval checks in the Service Technical Department in YourTech. There should
be segregation of duties in dealing with procurement Orders. Strict supervision should be
applied to discourage collision of fraud by employees.

4. Interview Questions

- Have Bravo Automobiles and Charlie’s Vehicles been validated to confirm they are true car
companies?
- Why were the 2 vehicles purchased? Where are they now?
- Why weren’t both vehicles purchased from the same car automobile provider?
- Why haven’t you approved all check transactions that are equal to or more than $50,000?
- What is the extend of your relationship with Anne Smith? Is the organization aware that you two are
together? Do you believe conversations are appropriate to have through your professional email
addresses?
- All transactions that you perform should be approved by a superior, correct? Who granted you
authority to approve journal entries and adjustments? Is there support or written evidence of this
approval authority?
- Why was the P&L statement adjusted? What error is being corrected/ adjusted?
- Why did you and Joe Scot purchase vehicles? If this purchase was for the organization,
- why wasn’t the same vehicle provider used for both purchases?
- Is there any evidence to support that the transaction booked by Anne smith for the
purchase two vehicles is an actual operating cost? What are these cars being used for?
- Do you perform a thorough review of the P&L and all transactions and adjustments
booked for the month before financial statements are finalized?
- What caused the decrease of $54,454.13 in Net Income? Why did Cost of Goods Sold
increase while Other Expenses decreased?
Anti-bribery/corruption Advisory
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