Question 1 In his own words, Daniel Jones was "The Dude". With his waist-long dreadlocks, part-time rock band, and well-paid job managing a company's online search directory - he seemed to have it all. Originally from Germany, Jones is now at age of 32, earned his doctorate and taught at the University of Munich before coming to the United States, where he started his career in computers. In 1997, Jones started working with the company as a director of operations for US-Speech Engineering Service and Retrieval Technology - working on a new, closely guarded search engine tied to the company's .net concept. The company allows employee to order an unlimited amount of software and hardware, at no cost, for business purposes. Between December 2001 and November 2002, Jones ordered or used his assistant and other employees (including high school intern) to order nearly 1,700 pieces of software which had very low cost but were worth a lot on the street. He then resold them for reduced prices- reaping millions. When items with a cost of goods sold of more than $1,000 are ordered, an email is sent to the employee's direct supervisor, who must click on an "Approve" button before the order is filled. In no individual order was the cost of goods more than $1,000 he made sure none of the orders required a supervisor's approval. The loosely controlled internal ordering system reflects the trust of the company puts in its employee. Hence, with the expertise that Jones has enabled him to manipulate the figures and transactions key-in into the accounting system of the company. This gave him the opportunity to perform transfer of cash into his own personal accounts without proper authorization from his supervisor. In June, FBI agents said they saw Jones exchanging a large box of software for cash in a department store's parking lot. The FBI contacted the company's security and began monitoring Jones's bank accounts. Previously, one account with his bank had an average balance of $2,159. In a short time, however, the average balance ballooned to $129,775. Another account at another bank showed irregular deposits totaling $500,000, none of which appeared to be from any legitimate income or other source. https://www.coursehero.com/file/19024699/june-2015/ This study resource was shared via CourseHero.com CONFIDENTIAL EAB30603_Forensic Accounting and Fraud Examination 4 Investigators also noted that Jones purchased a Ferrari F355 Berlinetta, a Jaguar XJ6 and traded in lesser vehicles for a Hummer, a Mercedes 500SEL and a Harley-Davidson motorcycle. He also bought an $8,000 platinum diamond ring, a $2,230 wrist-watch and a $4,000 bracelet. "You figured that I like big boy's toys by looking at some of my pictures," Jones wrote on his personal Web page. "I just can't resist". The Dude's Web page includes a camera for monitoring his cat and photos of his yacht, cars and other treasures. For a relatively low-level manager, it was an impressive collection. But at his company, where teenage software engineers can earn more than company directors, no one batted an eyelid. A neighbour across the street from Jones said Jones was clearly wealthy, but not flamboyant with his money. He described Jones as an intelligent man who didn't flaunt his education, would loan neighbors tools, and was always friendly. The neighbor was surprised to hear the accusations against someone he called his friend. All he knew about Jones was that he was a good neighbour who loved cars. "He was very, very helpful. The few times I had problems with my PC, he'd come and help straighten it," the neighbor said. "They are just ideal neighbors. I feel terrible for him and his wife." Jones and his wife lived in a modest 1960s split level home. In 2001, he joined the city's Rotary Club, "where he seemed more outgoing and personable than the stereotype techie," said a local jeweler and immediate past president of the club. "He seemed like what I would expect a genius software developer to be." The Dude was fired from the company in December 2002, shortly after the fraud was discovered. He has been charged with 15 counts of wire, mail and computer fraud-with each account carrying a maximum of five years in prison. He is expected to remain in custody until preliminary hearing. Required: A. Describe FOUR (4) symptoms of fraud that might be evident to a fellow employee. (8 marks) B. Discuss the THREE (3) elements of Fraud Triangle. (6 marks) https://www.coursehero.com/file/19024699/june-2015/ This study resource was shared via CourseHero.com CONFIDENTIAL EAB30603_Forensic Accounting and Fraud Examination 5 C. Explain THREE (3) components of the internal control system. (6 marks)