Charley Inc. Company Case Study

Overview:

In todays accounting firms, new associates are required to exhibit a certain level of analytical skills. With that in mind, this will help test your ability to use Tableau and Excel to analyze data/patterns and draw conclusions.

Research:

Use the notes from the informational interview with the CEO, Lisa Patterson and the other company employees to complete the required work with the deliverable section.

Deliverable:

Report: Each student is expected to submit the following:

A one to two pages Report on Findings that provides summary figures from question 1 and responses to question 2-4.

Completed Tabs 1-3 of the Contract and Sales Pay-OutWorkbook (Charley Inc. Appendix).

Formatting: Font Style (Arial), Font Size (12), and Line Spacing (1 - 1.5).

Company Overview:

Charley Inc Company (CIC or the Company), based in Austin, Texas, sells automotive parts to repair shops and auto parts stores across the United States. CIC was founded in 1988 by Lisa Patterson who began selling parts from her one-cargarage.

Informational Interview with the CEO Lisa Patterson:

Question:	Answer:
How was the issue identified by the client?	The issue was identified from an anonymous call into the whistleblower hotline on 10/12/2020.
Are there any further details regarding the allegation that has been provided to CIC?	Based on the call from the whistleblower hotline there is an alleged collusion amongst sales, legal, and accounting to list additional sales members as secondary sales representatives on contract sales to allow for unmerited pay-outs.
What are the sales pay-out related to?	The pay-outs are related to a CIC proprietary product.
Can you explain the sales pay-out process?	The sales pay-out process is: 1. Sales reps are responsible for meeting with the customers and collecting sales orders after an initial contract is established. 2. For a contract to be established, a manager from the contracting department must approve the terms and conditions of the contract (price, discounts, rebates, etc.) Each contract lists the sales rep that is the primary company representative (receives 10% of the contract price). The contract also allows for a secondary sales rep (receives 5% of the contract price); this is someone who would have assisted in the sales process. 3. Once its been approved, each contract is entered into the accounting system where the pay-outs are automatically calculated. This process is overseen by the accounting department. The accounting clerk is responsible for reconciling pay-outs paid to contract price. Once the information is reconciled and entered into the system, the contracting manager then reviews the contract entry and confirms that information was entered properly. It is not the responsibility of the accounting clerk to confirm that the salesmen are appropriately listed on the contract.

Are there any suspicions as to who may be involved?

The Whistleblower identified 5 individuals who he believes is involved: 1. Michael Lewis Sales Rep 2. Carol Jackson Accounting Clerk 3. Amy Leeway Sales Rep 4. Billy Steward Sales Rep 5. Larry Dougherty Contracting Manager

Other Information

1. The group of 15 salespeople works well together and they a close group given that it is a smaller business. They arefriendly with one another, with the exception is one individual who the CEO has told us is their star salesperson. This person consistently is in the top 3 every year for pay-outs. While the individual occasionally works as a secondary to help other salespeople, they refuse help on their contracts. 2. Mrs. Patterson admitted that she is very demanding and constantly reminds the sales force to meet and exceed established sales goals.

Your consulting firm, UTA Fraud Specialists, LLP has interviewed various CIC employees including the five (5) individuals identified by the whistleblower to gather information (see below). Some of the information is purely speculative. Bear in mind that some of it came from the interview with Susie Sanders, who is known to exaggeratethe details of a story or repeat things when she was not a first party to the events.

	Michael Lewis
Background	Michael has been with CIC for the last 8 years. He came on-board based on a recommendation from one of his former colleagues at another automotive partscompany. He was known to have a lot of connections within some of distributors that handle CICs products. He started off slowly in his first two years at CIC due to a non-compete agreement with his former employer. In the beginning of his third year (2016) his sales started to climb and typically does better than most sales reps.
Personal History	Michael grew up in an area that connected him with high level executives at automotive part distributors. Most of his customers are old friends of his. He is married with two young kids, and his wife is a stay-at-home mother. There is a rumor going around the office that Michael likes to live above his means since he just bought a brand-new Tesla, a new Rolex, and a new vacation home in Florida.

Related Character(s)

Billy Michaels wife and Billys soon to be ex-wife belong to the same online chat group.

	Carol Jackson
Background	Carol has been an accounting clerk at CIC for almost 13 years. She is currently in the same position that she was hired into. Her main responsibility is to calculate the pay-out payments to each of the sales reps. In addition, she is responsible for confirming that the classification of the sales reps as primary or secondary is appropriate based on the contract information filled out by the contract department. Carol has been up for promotion to accounting manager for the last 4 years and has been passed over each time. Based on her understanding, the company informed her that they have not been able to identify anyone who can fill her current position. Her belief is that the company cannot find someone else to take this low paying job.
Personal History	Carol has been married for the last 21 years and lives in an affluent area near her job with her 3 boys. Her husband is a well-known investment banker.
Related Character(s)	Larry Carol has been Larrys neighbor for the last six years. Larry and Carols husband have become good friends over the years.

	Amy Leeway
Background	Amy has been with CIC for the last 6 years. She started as a sales rep and has held the same position since then. Amy was a top 5 salesperson in her first four years, but during the last two years, her sales have sharply declined. Because she set the bar so high initially, management increased her sales quota. But during the last two years she has missed her sales quota and fears that if things do not improve, she could be out of a job.
Personal History	Amy is divorced and supports her two children along with her niece who has just moved in with her.
Related Character(s)	Larry Longtime friend of Amys since they attended the same college together. There is an office rumor that Billy and Amy have been secretly dating since Billy and his wife separated last year. The company does not allow inter-office dating.

	Billy Steward
Background	Billy has been with CIC for 4 years. Previously, Billy worked for one of the leading auto builders and worked in their sales department for 10 years. Because of his experience in sales, Billy does very well and has an easy time meeting his quotas since he joined CIC.
Personal History	Billys personal life is in disarray as he is going through his second divorce. It is rumored that makes numerous trips to Las Vegas, and he has a severe gambling problem.
Related Character(s)	Michael Michaels wife and Billys soon to be ex-wife belong to the sameonline chat group that loves movies. There is an office rumor that Billy and Amy have been secretly dating since Billy and his wife separated last year. The company does not allow inter-office dating.

	Larry Dougherty
Background	Larry has been with CIC for about 10 years now. He started off in sales and has since moved into the contracting department. His role is to make sure the terms of the contract are within the companys pre-established limits and that all the relevant information (client name, price, discounts, rebates) are properly listed. In addition, he inputs the sales representative names on each contract and classifies each representative accordingly as the primary or secondary.
Personal History	Larry has been happily married to his college sweetheart for 18 years and has 3 kids. He lives in a very affluent area near the office.
Related Character(s)	Amy Leeway Long time friend of Larrys since they attended the same college together. Bradley Jackson Larrys next door neighbor for the last six years and they have since become very good friends. Bradley is married to Carol Jackson.

Required:

1. For the Appendix, calculate of the following (15 Points):

i. Primary Pay-Out, Primary Pay-Out, and Total Pay-Out for each contract (columns G, H, and I).

ii. For Tab 2- Pay-Outs - Calculate the pay-outsby year to everyone.

iii. For Tab 3- Total Contract - Count of the number of contracts when the individual was primary or secondary for each year.

2. Describe how the fraud was conducted and who was responsible (45 points)

3. Quantify the exact amount lost by the company due to the fraud that occurred. (40 points)

4. List at least four recommendations you would provide to CIC that could have prevented this fraud and they should implement to keep this from happening again.(25 points