PART A

You are the Senior Internal Audit Manager of ABC Advisory and Consulting Services responsible for the internal audit of Steinhoff International. During your review of the working papers prepared by your staff during the last two months, you extract the following information from the working papers:

Transaction A

Some analysts had been concerned that Steinhoff had been expanding too rapidly for all to be as it seemed. Swedish furniture giant Ikea, founded by Ingvar Kamprad, represented Jooste$$s ideal business model. $$We purely follow what he did,$$ Jooste had explained in an interview with Financial Mail, a South African business publication. $$He produces his own stuff, sells his own stuff, and owns his own property. Our only problem was that we couldn$$t build a brand. So$,$ our strategy was to buy the number one or two around Ikea in every country.$$

Transaction B

Moreover, various market analysts had expressed concern about the high levels of complexity associated with Steinhoff$$s acquisitions from as far back as $2007$ and had questioned whether the company really could acquire struggling businesses and, nearly instantaneously, show improved results. Furthermore, growing revenues did not necessarily result in growth in cash flows.

Transaction C

While conducting the wage payout at the factory $($one of Steinhoff$$s subsidiaries$)$ on behalf of the factory foreman who was in a serious vehicle accident, the internal auditor was surprised by all the workers who enquired where the $$pot$$ was. He subsequently discovered that the factory foreman ran a $$pot$$ which was involuntary for all the factory workers. Participants entered R$5$ into a pot with a piece of paper with their names. A winner would be drawn immediately after the wage payout. The winner would get the wage check of the factory foreman and the factory foreman would keep the money in the pot. The wage of a factory foreman is R$2500$ per week and there are $1000$ workers in the factory who all earn about R$1000$ per week.

REQUIRED

Marks

$1\mathrm{.}1$

Fraud and corruption are commonly used in the same context and for the same types of fraudulent acts. The two terms are not the same and refer to different actions. For the scenarios above $($transaction A$-$C$)$ state whether or not each of the transactions can be classified as fraud or corruption. Indicate the type of fraud$/$ corruption that is applicable and provide examples as evidence of the type of fraud$/$ corruption you have indicated.

$15$

$1\mathrm{.}2$

Describe the factors that can motivate people to commit fraud or the most common causes of fraud by an individual

$5$