Discussion Overview:A family$-$owned distribution company has just celebrated $35$ years of doing business in a small community in Iowa. The balance sheet and income statement show a very strong and profitable company. Additionally, the family$/$owners are actively involved in the community. They employ $20$ people that also have strong ties to the community. They have a third$-$party independent accountant that reviews their financial statements on a quarterly basis.

The office manager for the last ten years, John, is also the bookkeeper for the company. The independent accountant has mentioned on more than one occasion the lack of internal controls in the business but understands that this is common in most small companies. However, the owners believe that they can trust their close$-$knit group of employees.

John$$s wife has developed a medical condition and has had to stop working. His personal financial problems mounted, and his home was facing foreclosure.

Two years go by$,$ and during the quarterly review, the outside accountant discovers a debit balance in accounts payable and unusual electronic payments that do not match any invoices. Upon further investigation, the accountant estimates approximately $$300,000$ in company funds are missing.

Initial Post

For your initial post, assume you are hired as a junior auditor. Consider a few components of this fraud and answer the following questions.

$-$What could have caused John to commit the fraud?

$-$What were potential motivations?

$-$Why do you think it took the owners so long to uncover the fraud?

$-$Do you think John fits what you would consider the $$typical$$ profile of fraud perpetrators? Why or why not?

$-$What steps would you suggest to the owners as they move forward?