Business Forensics

Purpose
The purpose of this assignment is to:

Discuss employee fraud against organizations.
Detect fraud characteristic and activities.
Action Items
In your own words, answer each question listed in the following case studies, as if you had been hired as a fraud examiner to recommend a course of action:
Chapter 14:
Case Study 2: Mikos Frederick
Case Study 2 Mikos Frederick, an immigrant from Ukraine, is a hotel owner in Las Vegas. Since his arrival in America during the 1960s, Frederick has built a very successful and popular hotel. Until recently, the hotel averaged $20 million in total revenue per year. Lately though, there have been rumors that Frederick’s hotel, the Russian Roulette, may be suffering unusual losses.
Recently, several of Frederick’s key staff have quit, complaining about low wages and nonexistent benefits. In fact, the hotel’s main attraction, its popular restau-rant chef Alec Klarinko, quit as well as the hotel’s head-lining performer. While Frederick focused on coming up with a new compensation policy, he hired CPA Tony Slinko to look into the hotel’s diminishing cash flows. The first thing Tony did was head for the kitchen to partake of the award-winning food. The new chef, Jim Smoot, wasn’t what Tony expected. First of all, he wasn’t Russian, as most of the employees seemed to be, and second he refused to talk about why he had come to the Russian Roulette when so many wanted to leave. After his visit to the kitchen, Tony began sifting through the accounting documentation looking for possible fraud symptoms. Tony reasoned that if employees felt like they weren’t being compensated accordingly, they may be apt to defraud the hotel.

Questions
1. Could Tony be right? Are employees defrauding the company, or has the Russian Roulette finally bit the bullet?

2. What possible fraud activities are associated with declining cash flows?
Chapter 15:
Case Study 1: The Gardia Mfana Letter
Case Study 1 The letter on the following page is example of a foreign advance-fee money scam. Read the letter and respond to the questions below.

Questions
1. Do you think Gardiah Mfana is an actual person?
2. Do you believe that his proposition is real? Why or why not?
3. List and explain at least three elements of fraud that are present in this letter.
4. What are some of the characteristics found in this fraud that are similar to the characteristics found in all types of Nigerian money offers?
5. Why do you think so many people become victims of this type of fraud?
6. What can you do to protect yourself from becoming a victim of consumer fraud?
Case Study 2: Is This a Ponzi Scheme?
Case Study 2 Is This a Ponzi Scheme? 24 Recently, a student came into a faculty member’s office and handed the faculty member a card he had found in the business school building advertising a company called 12 Daily Pro. He said someone had been distributing these cards around the building, encouraging students to invest in a “business opportunity.” It suggested that you could invest $6 to $6,000 and earn a 44 percent return in 12 days. The card called this program a “new economic paradigm.” The faculty member decided this had to be a Ponzi-type scheme and sent an e-mail to all students in the school reminding them that such schemes are illegal, unethical, and immoral. The next day a local TV channel carried the story, and the following day the electronic payment service for the scheme froze all the company’s accounts and essentially shut them down. A few weeks later, the SEC filed a securities fraud charge against the head of the company and against the company itself, calling it a Ponzi scheme.

Questions
1. What do you think made the faculty member believe this was a Ponzi-type scheme?
2. What is the annual return the scheme operators were promising on investments in this scheme?
3. Why do you think this scheme, which had been operating for over a month, attracted so many investors?
4. Was the action taken by the faculty member appropriate?

When answering the case study questions, adhere to the following guidelines:
All assigned case studies are labeled “Case Study #.” Do not use the “Short Cases,” which are labeled “Case #.”
Your answers must clearly address the issue in the case study, and reflect your own analysis of the case study based on the facts of the case as given in the case study.
You may use the textbook as your resource if needed. However, do not cut and paste or otherwise quote the textbook.
Do not research the case study or use, cite, or quote the case study or any outside source.
To earn full points for Case Study assignments, you must state your own opinion and analysis independent of any other source.
The maximum word limit for your responses is 500 words for each question.
Points will be deducted for errors in grammar, spelling, and punctuation.

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