Wayland Manufacturing Company Case Study

A. Fraud Fraud is best defined as “a knowing misrepresentation of the truth or the concealment of a material fact to induce another to act to his or her detriment” (What Is Fraud 2017). Fraud can be committed internally through occupational fraud, externally through bid-rigging and bribery, or against individuals through Ponzi and phishing schemes. Occupational fraud is further classified into three categories: corruption, asset misappropriation, and financial statement fraud. The potential fraud occurring at Wayland Manufacturing Company is asset misappropriation, which occurs when “an employee steals or misuses the employing organization’s resources” (The Fraud Tree-Asset Misappropriation 2016). Asset misappropriation impacts the company’s

The ITGC regularly handle program changes, development, and access as well as basic computer operations. A poorly designed IT framework and accessibility protocols increase the company’s susceptibility to internal and external attacks, which result in the loss valuable financial information or its utilization to commit and conceal fraud. In asset misappropriation for example, an individual with access to the company’s accounting software has the opportunity to commit and conceal fraud. For example, Wayland Manufacturing Company’s accounting department oversees the maintenance of the Accounts Payable and Purchases general ledgers. Therefore, Newbaker is responsible for recording invoices and cash disbursements. Therefore, he has the accessibility to modify the company’s vendor list to include fictitious vendors that increase the likelihood of payment for fictitious invoices (Fraud Risk Assessment n.d.) (Eikel 2008) (Arens, Elder, & Borsum

Public records like bankruptcy and property records are more available as they can be retrieved over the internet or face-to-face. For example, Fred Newbaker buys a house with the funds stolen from Wayland Manufacturing Company. If the fraud investigator can match the houses deed found on the city’s website with the Accounts Payable account, he or she may have found Newbaker’s motive for committing fraud. In addition, internet search engines like Google or Yahoo can be utilized for data collection. For example, the fraud investigator obtains Wayland Manufacturing Company’s 10-K report from the Securities Exchange and Commission’s (SEC) website. The information includes the length of the alleged fraud as well as the accounts being impacted like Cash, Accounts Payable, and Purchases (Arens, Elder, & Borsum 2013) (Coenen