Forensic Accounting

1. How did fraud occur? 2. Discuss segregation of duties. 3. Explain fraud triangle and how it connects to case. 4. How to avoid future fraud for Mr. Aaron?

LAUL STUDT. That Trusted Employee D. Larry Crumbley, Ph.D., CPA, CFF, Cr.FA Louisiana State University LEARNING OBJECTIVES After completing and discussing this case, you should be able to: Appreciate the importance of skepticism with respect to employees. Understand the importance of segregation of duties. Appreciate the importance of reconciliation of bank statements. Jim Aaron owned a successful energy service company in Baton Rouge, Louisiana for 14 years. Stacy Oxner helps Mr. Aaron with his recordkeeping. Mr. Aaron considers Stacy to be a trusted employee, having worked for him for eleven years. She has worked long hours, often coming in early and working late. She is an excellent employee. Stacy had to go to the hospital for a hip replacement. While Stacy was away from work the canceled checks came from the bank to Mr. Aaron's home. Feeling somewhat guilty for forcing Stacy to work such long hours, Mr. Aaron opens the bank envelope. He is surprised to find several large checks made out to Stacy: one for $14,000, another for $17,500, and a third one for $11,300. Mr. Aaron never signs blank checks. He does not have a check writing ma- chine, and the signatures on these questionable checks are his signature. The signatures have not been forged. How did this fraud occur? Discuss segregation of duties. Discuss opportunity in the fraud triangle with respect to this situation