Case 1

You are the owner of Trust Us Inc. Betty Favor, one of the organization's most trustedemployees, has worked there for 15 years. She socializes with you on a regular basis.

Recently, you hired a young new accountant who just graduated from college with honorsin accounting. This new employee, John Asset, tells Betty that the bank statement does notreflect the same bank balance as the bank reconciliation that he just prepared.

Previously, Betty had taken care of all banking matters and prepared the bankreconciliations. Betty comes into your office and says it appears that John does not knowwhat he is doing because there are errors on the bank reconciliation. She states that sheredid the bank reconciliation to fix the error.

Do you think Trust Us Inc. is vulnerable to fraud? If so, where is the fraud, and how was it perpetrated? What is your approach to solving this mystery?