The Scope and Limitations of the Fraud Examination

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Subject: Understanding the scope and limitations of the fraud examination and the responsibilities of the CFE

On October 5th, 2010, the fraud examination unit received an assignment from the owner of school regarding to the possibility of fraud disbursements occurred in his school. He suspected that someone is illegally and intentionally stealing money from his school. Based on his suspicion, a fraud examination was conducted by collecting information, reviewing & analyzing relevant records, and applying detecting methods.

The objective of my examination was to determine the possibility of misappropriation of school’s fund, identify the fraudulent schemes, and help the school to figure out who was behind the fraud.

I reviewed school’s bank accounts, checkbooks, and personnel files. After obtaining sufficient documentation, I found that the school funds were intercepted and converted to Mr Bob Daniel, who is the supervisor in school. He was authorized to control financial and the process of check’s preparation and issuance. Since none of financial supervisor reviewed his works, he misappropriated checks and fraudulently affixes the signature of an authorized maker. His forged maker scheme was executed through following steps: - Start scheme with 2 shell companies

- Prepare fraud checks and forge the signature of school’s owner - Deliver checks to the bank
- Fraud checks were payable to his shell companies and his account. He concealed his theft by using high activity accounts. Since tracking records on the high active accounts would not expose the fraud easily, he successfully embezzled approximately $400,000 from school’s funds. I applied detection methods to support my investigation as follows: - Tracking on the vendor expenditures: it would increase compared to prior expenses. - Detect on the process of check’s preparation and issuance: Bob Daniel was an important part in the entire process. Also, none of supervisor checked...
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