This is the case that the fraud report project based upon. It is designed to evaluate your ability to structure a fraud investigation based on case data.You will be playing the role of an accountant required to plan and implement a fraud investigation. Unfortunately, your supervisor has limited experience with fraud investigations.You will prepare a report for your supervisor.The report goes beyond just laying out the steps.At your supervisor's request, the report will also rationalize the plan based on basic principles of fraud examination to help improve her understanding of fraud examination and investigation.

As you complete this Learning Demonstration, you should focus on the following goals, which are tied to, and will help you to demonstrate the following goals and competencies:

Goal 1:Communication: Learners demonstrate ability to communicate clearly both orally and in writing

Competencies:

o1.1 Organize document or presentation clearly in a manner that promotes understanding

o1.2 Develop coherent paragraphs or points so that each is internally unified and so that each functions as part of the whole document or presentation

o1.3 Provide sufficient, correctly cited support that substantiates the writer's ideas.

o1.4 Tailor communications to the audience

o1.5 Use sentence structure appropriate to the task, message and audience

o1.6 Follow conventions of Standard Written English

Goal 2: Critical Thinking: Learners demonstrate ability to apply logical, systematic decision-making processes to formulate clear, defensible ideas and to draw ethical conclusions.

Competencies:

o2.1 Articulate and frame the issue

o2.2 Collect and evaluate information

o2.3 Evaluate the underlying causes or conditions of elements contributing to an issue

o2.4 Use systems thinking to arrive at a decision in the context of an issue

o2.5 Apply ethical principles when determining actions.

Goal 3: Quantitative Reasoning: Learners demonstrate the ability to use mathematical operations and analytical concepts and operations to address problems and to inform decision-making

oCompetencies

3.1 Construct models that represent real-world problems or processes

3.2 Develop visual representations of data

3.3 Analyze data using mathematical/algebraic operations.

3.4 Use calculated results to inform the problem or process.

Goal 4: Leadership, Facilitation, and Collaboration:Learners lead, facilitate, and collaborate with a variety of individuals and diverse teams to achieve organizational objectives.

oCompetency

4.1 Demonstrate an ability to plan a particular objective or goal

Goal 7: Functional Competencies in Accounting Fraud Examination: Learners demonstrate an applied understanding of how to detect, examine, and deter accounting fraud.

oCompetencies:

7.1 Legal, Regulatory, & Ethical: Demonstrate an applied understanding of fraud

7.2 Research: Discuss methods used to detect fraud

7.3 Research & Leverage Technology: Assess investigation methods used in fraud examination

7.4 Research & Leverage Technology: Assess concealment investigation methods used in fraud examination.

7.5 Strategic & Critical Thinking: Create an interview plan to detect fraud in a small organization.

7.7 Research:Describe and evaluate legal alternatives to pursue fraud cases.

Goal 8: Functional Competencies in Auditing:Learners demonstrate an applied understanding of role audits play in society, the standards related to auditing as used in the professions in accordance with the Generally Accepted Auditing Standards (GAAS) and GAAP, the steps required to execute a financial statement audit, and the role of other forms of auditing and assurance services.

oCompetencies:

8.3 Risk Assessment: Evaluate existing internal controls, including each component of the entity's internal control system, to assess business risks

Goal 12: Functional and Personal Competencies in Accounting Ethics: Learners demonstrate conduct that meets the standards of professional practice that reflects acting in an honest manner, free from conflicts of interest, and within the boundaries of law.

oCompetencies:

12.1 Legal, Regulatory, & Ethical: Learners demonstrate an applied understanding of ethics, professional responsibilities, and legal issues impacting the accounting professions.

12.2 Legal, Regulatory, & Ethical: Identify and respond to situations that may be unethical or in violation of professional standards.

12.3 Communication: Effectively communicate the importance of ethical behavior to clients.

Goal 13: Legal/Regulatory Perspective: Learners demonstrate applied understanding of the Uniform Commercial Code as it related to practicing accounting.

oCompetencies

13.4 Broad Business Competencies in Business Law: Learners demonstrate an applied understanding of legal and regulatory issues confronting organizations.

Case Description

The fraud began when Jessica Samuelson approached Salvatore Smith about a plan to steal and sell people's personal information.Salvatore Smith had begun to work at Infodynamics, Inc., a third-party credit-reporting agency that facilitates the retrieval of credit history data.Infodynamics had outstanding contracts with over 25,000 companies, allowing these companies to check the creditworthiness of potential customers, thus creating a direct line past the three main credit bureaus.As a customer service representative, Smith could obtain many confidential access codes.The clients of Infodynamics used these access codes to gain approval on credit requests.With permission to retrieve these confidential access codes, Smith had the opportunity to commit fraud.

In early 2000, Smith and Samuelson began to steal credit reports.The two fraudsters sold this information to a group of thugs with known involvement in the black market.The thugs would pay up to $60 for one person's personal information.After some time, the thugs began to provide the two fraudsters with names and social security numbers to help facilitate the fraud process even further.

To convert the information into money, the thugs would use information purchased from Smith and Samuelson to gain access to the victim's bank accounts and other financial information.The group of thugs would then take the following steps:

Deplete the bank accounts of the victims through wire transfers.

Change the addresses of the accounts so victims would no longer receive current information about their accounts.

Order new checks using the victim's bank account numbers.

Order new ATM cards to enable cash withdrawals.

Order new credit cards using the victim's name.

Establish new lines of credit in the victims' names.

Using these techniques, the fraud ring stole over $2.7 million from consumers over a period of about three years from late 2009 to late 2012.The most intriguing aspect of the fraud was that Smith quit working at Infodynamics in early 2010, but continued stealing the information for an additional two years. Smith claimed that most of the access codes he had stolen remained unchanged for full two years after he left the company.

Finally, in early 2012, Smith's increasing greediness led to the detection of his fraud.Since the fraud began, Smith had purchased a large home for himself and purchased several time-share, also known as fractional ownership condominiums around the world.He quickly adapted to the "jet set" life of a playboy.However, Smith was finding it difficult to keep up with his newfound friends who were independently wealthy.In his attempt to continue living a life of affluence, Smith stole around 15,000 credit reports from Infodynamics by using Ford Motor Company access codes.In addition, from February to May 2012, Smith again stole a large number of names.This time, Smith used Washington Mutual Bank access codes to steal 6,000 credit reports.Finally, in September 2012, Smith made what would be his last big theft of credit reports.Using Central Texas Energy Supply access codes, Smith stole 4,500 credit reports.

Subsequent to Smith's use of Ford's access codes, Equifax, one of the three largest credit bureaus in the United States, began to notice credit report request spikes in Ford's account.After Smith's next two large batches of credit report requests, Equifax decided to investigate further.Equifax discovered that almost all of the credit report requests came from one phone number, and that the fraudsters ordered requests in large batches of about 100 credit reports.

Your role in this learning demonstration is to assume you are the accountant assignedto investigate irregularities in Ford's account.So far, you have located the physical address associated with the telephone number.With the help of a law enforcement agency, you obtained a search warrant, secured a computer, and other equipment the fraudsters used to commit fraud.

DELIVERABLE:

Write a report to your supervisor that contains the following sections. Use the template I provide to you for this information.

1)Basic Background on Fraud

a) Types of Fraud - summarize the major types of fraud and explain which type this case represents.

b) Nature of Fraud - provide an overview of the fraud triangle and use information from the case to illustrate your discussion of each of the three components.

c) Fraud Behaviors - describe the basic behaviors that fraudsters tend to exhibit and provide examples of those behaviors exhibited in this case.

2)Evidence Gathering

a) Evidence Gathering Overview - Summarize the basic methods used to investigate a fraud that involves theft of information.

b) Evidence Gathering Plan - Develop a plan to uncover physical evidence in this case.Include the following points:

i) A summary of physical evidence gathering procedures and how you would implement these procedures in this case as appropriate.

ii) A detailed description of how you would proceed to gather data from the computer and Smith's cell phone, which you seized as a result of the search warrant.

iii) A summary of the basic ways to conceal evidence and an analysis of how the fraud ring may have concealed evidence in this case.

iv) A summary of the basic methods used to obtain documentary evidence and how these methods might apply to this case.

3)Interview Plan

a) Interviewer characteristics - Summarize the basic characteristics of a good fraud interviewer.

b) Interview Plan - Develop a plan to interview Smith regarding this case.List the questions you plan to ask in the interview. (This is an exception to the rule to avoid using bullet point lists.)

4)Prosecution Recommendations (assume you are able to gather sufficient evidence that you believe would lead to either a criminal conviction or civil recovery for credit card companies that covered the losses of their customers).

a) Justification for Prosecution - Present the general arguments for or against prosecuting fraud cases from the standpoint of the credit card companies that sustained losses due to the fraud and make a recommendation about whether the credit card companies should proceed.

b) Method of Prosecution - Present a general comparison between civil and criminal prosecution procedures.Make a recommendation to present to the credit card companies that were harmed concerning which approach they should take and why.Also, include the possibility of taking both approaches.Note, law enforcement agencies will not press charges until one or more of the credit card companies presses charges.

Requirements:

Follow APA style guidelines using in-text citations with page numbers whether information is a direct quote or paraphrased, running head with page numbers, Arial 12 point font, 1 inch margins and double spacing with 0 point before and after, no seriation. ALL direct quotes must be in quotation marks.

Exception to APA style guidelines: Do not include an abstract.

No pictures, tables, figures, etc., should be included in the body of your report. They can be placed in an appendix to your report but they will not count in the length of your report. Also avoid bullet point lists. Most of the report will be written in essay style responses.

Length of fraud report: a minimum of 15 FULL pages (this does NOT include the title page or reference list)

Include the following for your fraud report:

title page

body of the fraud report with required headings (Please see the Fraud Report Required Format for required headings to use in your report. It is posted in Course Deliverable Requirements.)

reference list

The name of the file for your fraud report should be first name last name Fraud Report. For example:

John Smith Fraud Report.docx

Use the Template provided in the Course Deliverables Requirements for the headings of your paper.

Template:

I. Background Information on the Fraud Committed

A. Type of Fraud the Case Represents

II. Fraud Triangle

A. Case Specific Information Related to the Fraud Triangle

1. Opportunity.

2. Pressure.

3. Rationalization.

B. Fraud Behaviors Exhibited by the Fraudsters in This Case.

III. Evidence

A. Evidence Gathering Plan

1. Evidence gathering methods used to investigate the theft of information.

2. Summary of implementation of appropriate physical evidence gathering procedures in this case.

3. Summary of the basic ways to conceal evidence and an analysis of how the fraud ring may have concealed evidence in this case.

4. Detailed description of how to gather data from the computer and Smith's cell phone seized as a result of the search warrant.

5. Summary of the basic methods used to obtain documentary evidence and how these methods might apply to this case.

IV. Interview

A. Interviewer Characteristics

B. Interview Plan

V. Prosecution Recommendations

A. Justification for Prosecution

B. Method of Prosecution

Please note, there will be NO content for the 5 main headings ( I. Background II. Fraud Triangle III. Evidence, IV. Interview V Prosecution Recommendations)