Chapter $1MCl$ Introduction $-$ Real Estate Brokerage, Inc. $($REB$)$

Jennifer James is the broker and owner of Real Estate Brokerage, Inc., a real estate sales organization in Morgantown, West Virginia. Normally, James hires a local accounting firm on an annual basis to audit the organization's financial records. With the business in a state of rapid growth, James has been preoccupied and has forgone the audit for the last three years. Instead, her husband, Ashford James, has exercised his somewhat rusty college accounting skills to pull the data needed for tax professionals to prepare the tax returns. In prior years, Mr$.$ James observed no issues with the records.

During the current year's annual reconciliation of accounts, Ashford discovered discrepancies between the commission receipts from real estate closing records and the actual bank deposits. Ashford also noted that despite assurances from his wife that business has been good, that the checking account balance has continued to decline and the company's bank balance dropped to negative in December and the company bounced a few checks during the month. Ashford also noted some unusual expenditures $($seemingly non$-$business related expenses$)$ in the company accounts that he was not aware of; such expenditures were not observed in prior years.

Ashford James promptly but quietly filed a report with the local prosecutor, a long$-$time family friend and requested a "thorough examination." As a result, the prosecutor's office has contracted a regional accounting firm to perform the financial examination.

The assignment includes interfacing with the prosecutors, special agents, law enforcement, and the complainant $($Ashford James$).$ The managing partner making the assignment has stressed the following points:

The prosecutor's office has assigned special agents $($SA$)$ from the Task Force on White Collar Crime to conduct an examination. Ashford James will pay all fees for this examination. If criminal charges

The assignment includes interfacing with the prosecutors, special agents, law enforcement, and the complainant $($Ashford James$).$ The managing partner making the assignment has stressed the following points:

The prosecutor's office has assigned special agents $($SA$)$ from the Task Force on White Collar Crime to conduct an examination. Ashford James will pay all fees for this examination. If criminal charges are found to be support, the prosecutor's office will take the case forward.

It is extremely difficult to schedule time with the James':

Jennifer James is politically well connected in the community and difficult to contact due to the nature of her business. Also, given her husband's concerns, she will not be contacted directly.

Ashford James is a practicing surgeon at a local hospital.

The couple has four children.

Real Estate Brokerage, Inc. is a "small business" and doess not employ staff accountants.

Last month a fire at the real estate office destroyed the financial records, both paper and electronic.

In addition to compiling questions and information requests for the James meeting, documentation of the team's working processes and discussions is to be prepared and maintained throughout the course of the case as working papers.

Assignment:

Develop a preliminary examination plan to examine the issues described in the fact scenario:

Consider the various issues outlined above and think critically about the scope of your examination and how you might approach the concerns.

Brainstorm the case issues identified and start to generate a series of questions that you as the examiner must answer in order to proceed with the examination and "solve the case."

Rank order the issues and related questions.

Develop a data request that describes the evidentiary material required to proceed with the examination. The data request lists physical and$/$or electronic evidence that might be helpful. Recall that as a forensic accountant and fraud examiner that "numbers" are your bailiwick. As such, evidence $($data$)$ could be physical or electronic and exanoples might include financial numbers, financial documents, statements, invoices, cancelled checks, dates, times, contracts, databases, non$-$financial metrics, etc. Given a fire at James's Real Estate, from where would these records come? $($Note: The prosecutor has subpoena power to solicit evidence from $3^{rd}$ party sources.$)$

Merge the issues and questions with the data request. Alternatively stated, what evidence is required to examine the issue or answer the question.

Rank order $/$ prioritize your list of issues $/$ questions and associated data request.

$\backslash$table$[[$Question$/$Issue$,$Data Request,Time Period,Purpose$],[$Missing Deposits,,,$],[\backslash$table$[[$Who is involved in$],[$deposit activities?$]],,,],[\backslash$table$[[$Who is involved in$],[$deposit activities?$],[$independently confirm$],[$missing deposits.$]],,,],[\backslash$table$[[$Attempt to$],[$independently confirm$],[$missing deposits.$]],,,],[\backslash$table$[[$How were the deposits