Practical Problem 4 You pull the vendor agreements for the vendors selected (which are found on the following pages). Some of the vendors have long standing relationships with JMC while others have been fairly new. You also pull a sample of the requisitions and can find all of them except for the ones for Lantern Co. You then go to accounts payable and match the requisitions that you found in purchasing with the invoices that have been paid for each vendor. The invoices you have pulled contain the required paperwork and have the proper authorizations, even for Lantern. While in accounts payable you start talking with one of the accounting clerks, Beth Ann, who tells you that Mr. Brackens is a very demanding manager and is very big on providing prompt payment to the vendors. In fact, for one vendor whom he says is very picky, he has to pick up their checks and personally deliver them. Beth Ann recalls that the account is Lantern Co. For a couple other accounts, he wants to know every month when their checks go out. He says he's having to monitor them since they are fairly new. He used to do that for some other accounts, but not any more. Although she couldn't remember the ones that he doesn't ask for any more, he does keep an eye on Top Q and Blues Pro. This is probably a good thing, since we pay them more than others. You pull the checks and they have all been deposited into the vendor's checking accounts. Questions: 1. Is there fraud? Why or why not? 2. Will you expand your audit? How? 3. Do you have predication for a fraud examination? Why or why not? 4. What fraud schemes could be occurring? Practical Problem 4 5. Who do you suspect? Why? 6. Who don't you suspect? Why? 7. What are your next steps? Practical Problem 4 JMC New Vendor Authorization Vendor Name: Black IPS Mailing Address: PO Box 17758 Telephone Number: 478-2245 Tax ID: 74-4752201 Date in Business: 5/15/65 Owner/CEO Ronald Black JMC Contact: Russell O'Neil Contact Telephone #: 478-2245 City/State/Zip: Street Address: Austin, TX 78701 1701 West Ave S. Smith Date Checked: References: Pace Industries Bellville Products Vendor checked by: 12/15/72 Vendor Code: 1432 Approved by: Jim Miller Welcome letter: 1/15/73 Date Approved: 12/30/72 Comments: Very impressed with the quality of the products. Their references checked out well. Practical Problem 4 JMC New Vendor Authorization Vendor Name: Warehouse Equipment Mailing Address: 4221 Braker Lane Telephone Number: 432-2699 Tax ID: 74-4765441 Date in Business: 8/20/80 Owner/CEO Bill Stephens JMC Contact: Tom McLean Contact Telephone #: 432-2699 City/State/Zip: Street Address: Austin, TX 78732 4221 Braker Lane S. Smith Date Checked: References: Black IPS Tressle Inc. Vendor checked by: 9/22/81 Vendor Code: 1694 Approved by: Jim Miller Welcome letter: 10/1/81 Date Approved: 10/12/81 Comments: Showroom was clean and tidy. Mr. McLean will be easy to work with. Mr. Stephens has assured us that all orders will be delivered as promise or else there will be a substantial discount. Practical Problem 4 JMC New Vendor Authorization Vendor Name: Lantern Co. Mailing Address: PO Box 4620 Telephone Number: 432-9999 Tax ID: 74-4765224 Date in Business: 10/15/95 Owner/CEO Thomas Zachary JMC Contact: Thomas Zachary Contact Telephone #: 432-9999 Austin, TX 78701 City/State/Zip: Street Address: Date Checked: References: Smith & Jones George Fox & Associates Vendor checked by: T. Brackens 10/25/95 Vendor Code: 2365 Approved By: T. Brackens Welcome letter: 10/25/95 Date Approved: 10/25/95 Comments: Practical Problem 4 JMC New Vendor Authorization Vendor Name: Seros Inc. Mailing Address: 10478 Anderson Road Telephone Number: 469-7000 Tax ID: 74-4765441 Date in Business: 4/15/90 Owner/CEO Tad Seros JMC Contact: Tim Seros Contact Telephone #: 469-7000 City/State/Zip: Street Address: Austin, TX 78722 10478 Anderson Road A. Harkins Date Checked: References: Robbins & Co Taylor Inc. Vendor checked by: 9/15/91 Vendor Code: 2585 Approved by: T Brackens Welcome letter: 9/25/91 Date Approved: 9/25/91 Comments: Practical Problem 4 JMC New Vendor Authorization Vendor Name: Randazzo Supply Mailing Address: 600 Guadaloupe Telephone Number: 476-1075 Tax ID: 74-4747771 Date in Business: 2/10/84 Owner/CEO Sam Randazzo JMC Contact: Tim Randazzo Contact Telephone #: 476-1075 City/State/Zip: Austin, TX 78701 Street Address: 10478 Anderson Road Date Checked: References: Ribault & Associates Parker-Tribune Vendor checked by: T. Brackens 4/20/84 Vendor Code: 4485 Approved by: J. Miller Welcome letter: 4/20/84 Date Approved: 4/20/84 Comments: This is a family run operation run by brothers. They both seem to be very excited to work with us. They will guarantee their prices and the quality. If their service ever slips the owners want to know about it immediately Practical Problem 4 JMC New Vendor Authorization Vendor Name: AA Supply Mailing Address: PO Box 1477 Telephone Number: 478-1200 Tax ID: 74-4907551 Date in Business: 06/17/87 Owner/CEO Bill Taylor JMC Contact: Ed Billings Contact Telephone #: 478-1200 City/State/Zip: Street Address: Austin, TX 78701 1600 Trinity Street T. Brackens Date Checked: References: Austin Supply IBM Vendor checked by: 5/15/90 Vendor Code: 3282 Approved by: J. Miller Welcome letter: 5/25/91 Date Approved: 5/20/90 Comments: Met with Mr. Taylor and Mr. Billings. All paperwork was in order. The office staff is professional. Practical Problem 4 JMC New Vendor Authorization Vendor Name: Ad Systems Mailing Address: PO Box 17854 Telephone Number: 476-9522 Tax ID: 74-4221122 Date in Business: 4/15/95 Owner/CEO Russ Sealy JMC Contact: Richard Lewis Contact Telephone #: 476-9522 City/State/Zip: Austin, TX 78701 Street Address: 200 6th Street T. Brackens Date Checked: References: AA Supply Stetson-Rollins Vendor checked by: 4/20/95 Vendor Code: 8999 Approved by: T. Brackens Welcome letter: 4/20/92 Date Approved: 4/20/95 Comments: Practical Problem 4 JMC New Vendor Authorization Vendor Name: Top Q. Mailing Address: PO Box 47000 Telephone Number: 432-1600 Tax ID: 74-4745555 Date in Business: 8/15/00 Owner/CEO Robert Brill JMC Contact: Robert Brill Contact Telephone #: 432-1600 City/State/Zip: Austin, TX 78701 Street Address: 3895 Lamar Street T. Brackens Date Checked: References: Blues Pro Driskell Co. Vendor checked by: 10/05/00 Vendor Code: 2461 Approved by: T. Brackens Welcome letter: 5/05/97 Date Approved: 10/00/00 Comments: Practical Problem 4 JMC New Vendor Authorization Vendor Name: Blues Pro Mailing Address: PO Box 47100 Telephone Number: 432-1645 Tax ID: 74-4745555 Date in Business: 8/15/00 Owner/CEO Steven Brill JMC Contact: Steven Brill Contact Telephone #: 432-1645 City/State/Zip: Austin, TX 78701 Street Address: 3990 Lamar Street A. Harkins Date Checked:10/20/00 References: Top Q Aspen Ltd. Vendor checked by: Vendor Code: 2460 Approved by: T. Brackens Welcome letter: 5/05/97 Date Approved: 10/20/00 Comments