Basilad, Howell Cortez, Eric Anthony

Dagasdas, Chisum Du, John Daniel

Pintac, Patrick Earl Untal, Joanne

Almagro, Steven Marion 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 company’s
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 she’s
the owner and she’s the one hires the auditor so it seems like she’s 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 $5000

Sale # 3 $5000
Payment # 3 $5000
Sale # 4 $5000
Payment # 4 $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 shouldn’t 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.