Stevens Manufacturing Company Case (Part II)

You decide to conduct an audit of the purchasing function for this department. But before you do, you decide to get some additional information about the department and its employees. You find that Mr. Ryan has been an employee for more than 25 years, coming to the company right from college. He has six employees that report directly to hima manager, Alexa Nichols; two senior buyers and three junior buyers. Nichols has worked at SMC for 15 years and the buyers have worked in the department for anywhere from six months to ten yearsBill Kren, Sr. Buyer (10 years); Wendy Matthews, Sr. Buyer (7 years); Richard Lucas, Jr. Buyer (3 years); Theresa Morris, Jr. Buyer (2 years); Peter Denz, Jr. Buyer (6 months).

Regarding purchasing policies, any purchase that is more than $10,000 must go out for bid. All bids must be approved by the manager of the purchasing department or higher. Only authorized vendors are allowed to bid. Vendors without a vendor number must be handled by special processing and approved by the director.

Junior buyers can authorize purchases of up to $5,000; senior buyers, $7,000; managers and directors, $9,000.

You pull a listing of vendors who have been paid more than $100,000 for the years, 2013, 2014, and 2015, and find the following:

Vendors with more than $100,000 of sales to Stevens Manufacturing Co.:

2013

2014

2015

Total

% of Total

Backlast

47,844

12.09%

52,468

5.90%

-

0.00%

100,312

3.59%

MJ Equipment

30,402

7.68%

44,447

4.99%

70,940

4.69%

145,789

5.22%

Spotlight Co.

38,089

9.62%

78,682

8.84%

45,872

3.04%

162,643

5.83%

Finest Distributors

61,166

15.46%

24,556

2.76%

78,229

5.18%

163,951

5.87%

Serial Inc.

37,090

9.37%

48,842

5.49%

119,068

7.88%

205,000

7.35%

Roberts Co.

41,189

10.41%

62,012

6.97%

111,845

7.40%

215,046

7.71%

Alex Systems

50,470

12.75%

52,198

5.86%

140,023

9.27%

242,691

8.70%

PG Distributors

67,194

16.98%

80,378

9.03%

113,723

7.53%

261,295

9.36%

CQ Supplier

20,321

5.13%

78,019

8.77%

173,853

11.51%

272,193

9.75%

Super W

-

0.00%

105,620

11.87%

247,172

16.36%

352,792

12.64%

Brics Inc

-

0.00%

260,785

29.30%

408,323

27.02%

669,108

23.98%

Total

393,765

100.00%

888,007

100.00%

1,509,048

100.00%

2,790,820

100.00%

Questions:

1. Is there anything suspicious in this summary? Explain your answer.

2. Do you have predication for fraud? Why or why not?

3. What are your next steps?