A chemicals plant had an unfortunate accident. Chemicals leaked from a plant-holding tank and seeped onto the parking lot. A number of employee vehicles were damaged and required repainting of the vehicles. The company agreed to reimburse employees for the cost of these repairs. Employees would turn in bills for the repairs to the Controller, Rob Trout. Nine months later, at a board meeting, someone made a remark about the fact that bills were still being turned in for reimbursement. By this time, the total of the damages reimbursed to employees had reached nearly $150,000. After making inquiries, it was discovered that some of the repairs were for expensive paint jobs, upgrades, buffing, body repairs, and waxing. Further investigation revealed that thousands of dollars were reimbursed for paint jobs on cars that were old pieces of junk. Moreover, some employees had turned in bills for similar jobs just a few months apartin other words, some cars were reimbursed for the same repair twice. Although this appeared suspicious, no one caught it until the internal auditors came in and reviewed the invoices and compared them with the employee list and cars repainted.

A.) Control Activities: Name eight rules that the company should have created to prevent fraudulent activity from occurring. The rules would be included in their policies and procedures.

B.) Monitoring: For each of the groups identified below, define two monitoring activities that they could have performed to reduce the risk of (and opportunity for) this situation occurring.

• Controller, Rob Trout
• Internal audit
• Board of Directors (BOD)

C.) Fraud Triangle: Referring to the fraud triangle, provide an example of how the three factors could be present in this situation. Explain which of the three factors the company has control over and how they can mitigate the risk of fraud.

D.) In the Procurement Process chapter, we discuss the concept of a 3 way match. Could this process be applicable to this situation? If so, how? Explain what items could be compared to one another prior to recording and disbursing a payment.