Case Study: The Fraudulent Expansion Scheme of Exotic Travels Inc.

Background

Exotic Travels Inc., a mid$-$sized travel agency known for its luxurious vacation

packages, had seen considerable growth over the past five years. To capitalise on this

success, the company announced a major expansion plan, which included entering

new markets and enhancing their digital presence. Investors were optimistic, and the

company's stock price soared.

Discovery of Suspicious Activities

However, several months into the expansion, irregularities were detected by an

internal auditor. The auditor noticed discrepancies in the financial statements,

including potential:

Overstatement of revenue:

$$ The internal auditor identified significant sales contracts with new corporate

customers named SuperDodg and Fraudger, which have the same

Procurement Director and who the auditor suspects might be a cousin of

Exotic Travels Inc$$s CFO. In addition, it appears all sales relating to those two

contracts were made in December $2022,$ the last month of the company$$s

financial year.

Unverified payments:

$$ The internal auditor also identified, close to the date of these contracts$$

signature, payments made by Exotic Travels Inc. to an unknown bank account,

that they could not match to a specific invoice. These payments were approved

by the CFO.

Understated expenses:

$$ The internal auditor received a letter from an unsatisfied supplier, FlyCo,

claiming they had been waiting for a $100$k payment for several months. When

the internal auditor verified, they could not find any records of these payables$1$

in the accounts. They, however, found copies of the invoices in one of the

drawers of the Accounting and Finance manager$$s desk.

The auditor reported these findings to the company's compliance officer, who

engaged Ankura to perform a confidential investigation.

The Investigation

The investigation team comprised forensic accountants, IT specialists, and legal

advisors. They began by examining the financial records, contracts, and email

correspondence of the company's top executives and the finance department.

$1$ Accounts payable, or payables, refer to a company's short$-$term obligations owed to its creditors or suppliers, which have not

yet been paid.

Confrontation and Confession

Once sufficient evidence was gathered, the company$$s legal advisors confronted the

executives involved. Faced with overwhelming evidence, several executives

confessed to orchestrating a sophisticated fraud to enhance their personal wealth and

deceive investors and regulators.

Legal Actions and Outcome

Following the confessions, the company took immediate action:

$$ The involved executives were terminated and faced criminal charges.

$$ The company cooperated fully with regulatory authorities.

$$ A restitution plan was established to compensate affected investors.

$$ Comprehensive reforms were implemented to strengthen internal controls and

prevent future fraud.

Questions:

Understanding Corporate Fraud:

Prepare answers that covers the following questions and also could you provide research publication to back up when answering :

$1.$ Please highlight and provide an overview of each area of concern you

identified at Exotic Travels Inc.

$2.$ Explain how you would investigate each of the items you identified in

question $1$ through $1)$ financial analysis, $2)$ digital forensics and $3)$ email

review.

a$)$ For email correspondence review, the software used by Ankura

allows for key searches to be performed, returning emails

containing specific keywords, sent during a defined time period,

and sent or received by certain individuals. Please outline some

of the key search terms you would include to find emails that

would help you evidencing the issues identified.

$3.$ Explain the potential motivations of the executives behind these actions

and the overall impact on the business.

$4.$ What preventative actions could Exotic Travels Inc have taken?