This is a hypothetical situation where you are a member of an external audit team that has discovered a possible fraud.

While performing an audit of client TCC Corporation, the external audit team notices something that does not look right. The company's receivables aging report showed that bank loan eligible receivables were approximately $91 million. The audit team calculated the bank loan eligible receivables to be approximately $50 million. The client did not identify specific accounts in writing off bad debt; there was extremely slow credit memo processing; and items that management had not focused on remained uncollectible and ineligible for financing. In addition, over the last two years, the company's credit department had unusually high turnoverfour different people held the credit manager position under an intimidating CFO. The current credit manager was a friend of the CFO and had worked with him at a previous company. After your review of some invoices and asking about customer information to confirm information, the credit manager admitted to creating false documents and arranging fictitious sales with clientsall with the knowledge of the CFO.

In your postings discuss the following questions: 1. What are the red flags that point to the possibility of fraud? 2. What would you say was the main problem(s) in this case that allowed the fraud to occur?