24. Please identify four (4) weaknesses in the following scenario (there are more than 4!):

An agent for a large insurance company has a small office in a rural town. There are only two employees in the office: the agent and his secretary.

The agent spends all of his time in meeting with customers and selling insurance products to them. The secretary processes all of the paperwork connected with the insurance policies, including processing the collection of premiums and the paying out of claims.

The agent feels that he is a big man and that his time is very valuable, and that he should not bother himself with clerical work, so he does not supervise the secretarys work, nor does he look at the accounting records, cash documents or bank statements. Besides, he trusts the secretary as she is very hard-working; in fact, she has never missed a day of work in five years and does not even take her annual leave.

The agent works for a large insurance company. However, because the number of policies and customers handled by the office is relatively small, the insurance companys internal audit office has not bothered to audit the offices records/cash for several years. The external auditors have also never visited the office.

25. The following article appeared earlier this year: By David Owens, Hartford Courant, 02/13/2020 Winsted woman pleads guilty to stealing $850,000 from physically, mentally disabled people in conservatorships:

A 72-year-old Winsted woman who stole more than $850,000 from people with physical and mental disabilities pleaded guilty Thursday and faces up to seven years in prison.

Sheila Grochowski was arrested by Avon police and the chief states attorneys office in November 2017 on more than a dozen larceny and forgery charges and had previously turned down a plea offer. But with her case called in for trial and jury selection scheduled to begin Thursday, she asked if the states plea offer was still available and accepted it, pleading guilty to a single count of first-degree larceny and two counts of second-degree forgery.

She is scheduled to be sentenced April 29 to 10 years in prison, suspended after she serves seven years, plus five years of probation.

Her lawyer, public defender John Stawicki, will be able to argue for less prison time and probation. Grochowski was a bookkeeper and secretary for Barbara H. Hance Associates, a Farmington company that handles the financial affairs of people whose affairs are controlled by probate courts. Prosecutor Christopher A. Alexy told Hartford Superior Court Judge Laura F. Baldini that Grochowski wrote 437 checks to herself from the accounts of Hance clients. The state had video obtained from Grochowskis bank showing her depositing two of the stolen checks, and bank records from her bank and those of her victims showing the extent of her thievery.

Grochowski pleaded guilty under the Alford doctrine, meaning she disputed some of the states evidence, but acknowledged the state had enough evidence to convict her at trial. According to the warrant for Grochowskis arrest, Grochowski forged Hances signature on 591 checks and two withdrawal slips and stole $851,811 between January 2010 and May 2016, when Hance fired Grochowski.

Authorities do not know where the money went, but when confronted by Hance in early 2015 about the embezzlement of $4,829, Grochowski admitted the forgery and said she needed the money for medical expenses, according to the warrant. After that incident, Hance kept Grochowski as an employee, set up a repayment plan, and did not notify the police. In May 2016 more problems with checks were found, and Hance determined that Grochowskis alleged thefts were more extensive. A forensic audit by an accounting firm, and a review of thousands of pages of Grochowskis bank records by Avon Det. Edward Espinoza and state Inspector Jack Bannan revealed the massive scale of Grochowskis thefts.

The investigators identified 25 people they say were victimized by Grochowski, including her own father who suffered from Alzheimers disease and was under a conservatorship. Grochowski allegedly wrote herself checks from her fathers accounts and listed herself as executor of his estate, although he was still alive at the time. The investigators also found that it wasnt the first time she has stolen. In 1988 Grochowski was charged by Torrington police with first-degree larceny, second-degree larceny, and third-degree forgery. She was convicted in November 1989 and sentenced to five years in prison.

Required:

(a) In order for fraud to occur, two elements must be present, opportunity and motivation. Please make reference to the text in the article above that supports/describes each element.

(b) In addition, there are several important characteristics (different from opportunity and motivation) that appear in many fraud cases. Please describe at least three of these characteristics that are described in the article, using the Fraud checklist posted on page 7 of the Additional PowerPoint Required Reading in the Chapter 8 section of Course Content on BlackBoard as a reference. Note: if you do not make reference to this specific checklist, you will not earn any points for this question.

(c) The article mentions that Grochowski was caught stealing by Hance in early 2015, however, Hance did not press charges or terminate Grochowskis employment at that time. This is actually more common than you may think; in 70% of cases involving employee fraud, no criminal charges are filed against the employee. Do you think this is a good idea?