Fraud Detection and Investigation: Micro Computer Consulting Services Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Fraud Detection and Investigation: Micro Computer Consulting Services Case Solution

(A)

Part-1

Answer 1

It was revealed that the MCS manager salary was only $18000 a year. This should be investigated as the manager is enjoying a prestigious living. Thus, other sources of the income of the manager should be investigated.
There was about 200% increase in the university’s volume of computer, this should be investigated. The computers were becoming much more common and the need to have more computers was justified. However,the 200% increment is too high, therefore proper inquiry must be made.
The audit team must investigate in the matter in which there is no documentation. The manager is the key personnel that make the decision and has significant influence in the store department. Inquiry from the manager as well as the other employees of the store must be made.
The audit department should ascertain whether there is any collusion between the supervisor and the manager that led to the fraud.
The physical verification, as well as inquiry form the responsible personnel, should be made of the purchases which are valued at $1200000 since no documents arepresent in support of these purchases.

Answer 2

The internal auditor will issue the internal audit report to the audit committee. In this case, there is no audit committee; the audit department is reportable to the VP of Administration and Finance. Since the audit request was from the Director of the University computing services, the auditor should also report to the Director as well.The objective of the audit report will be to describe the internal controls and procedures in place and the effectiveness of these controls. It will also explain the system and procedures in place that governs the working of the department etc. The deficiencies will be identified and reported along with the recommendations for its improvement.

Answer 3

The recommendations might include the following:

There was no written position description,therefore employees will not be specific as per their authority and responsibilities. Without the proper job description the work will be inefficient and everybody might be working in a conflicting role. The director should define the job description and should reorganize tasks and jobs with proper written rules, policies and job descriptions. This will make the store operations efficient.
There was no control over the transactions made by the store, thereforethis is high risk area since there are chances of fraud and misappropriation. Moreover, the manager has the overall power on the transactions made which led to possibility of fraud aided by the weak controls and less involvement of the upper departments. There should be check and balance created on the store operations and transactions. A proper internal control system should be places over the transactional functions of the store. An integrated computerized system should be created with the finance department so that all transactions are authorized and documented properly.
There is lack of sincerity and responsibility which is evidenced from the unfamiliarity of the supervisor from the store operations. This will be addressed by the proper job description and proper rules of conduct and policies.

Part-2

Answer 1

The point where the repair shop indicates the information about the box, and inspection of the other documents supports the information, is the point where the auditors might suspect a potential fraud. However,the major point where it became obvious that the fraud exists is the point where the director mention that the employee of the university has been providing consulting services in the name of micro-computing consulting services MCS.

In compliance of the auditing standards auditor must document the findings of this investigation and should evaluate the effect of such fraud on the financial statements, whether this might cause the material misstatement. The fraud detected should be communicated to the senior management. Plan and carry out further investigation in this detected fraud, SAS-99[1]..................

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