using the db and the description of the revenue cycle provided document why or why not you believe there might be a fraud

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conditions for fraud

1)intentional error

2) material

3) relied upon

4) damages

Bill's Electronics Background: Bill's Electronics was originally formed by Bill Chokan to supply builders with expertise in the area of home electronics systems. The company was formed during the housing boom of the early 2000's and found a niche as many builders had clients that wanted to include sophisticated music and video systems in their houses, but the builders lacked the necessary expertise. Bill's original location was in Greenfield Massachusetts, but the firm has branched out to new locations and now has seven stores. Each store has a manager and assistant manager that basically run the store. The original store managers were connected to builders in the area and also had expertise in the different electronic components and configurations that worked well in different settings. As the business grew each manager found they needed an assistant manager to help run the store. Each manager also had authority to hire salespeople and now each store has at least three people that make sales. Until the early part of 2008 all the salespeople functioned solely as designers of home systems and sold product to builders and wholesale customers with the manager and assistant manager helping in the design process and monitoring the electronics market for new products. In late 2007 Bill and his partners decided that the business should expand into the retail market. They decided to try this retail experiment in the Providence and Boston stores. In December of 2008 the Albany store took over the retail operation of a local store for the first few weeks as a trial run to see if they wanted to purchase that operation. After two weeks the experiment was discontinued as they could not agree on certain monetary conditions. The next store that might see a retail segment is the Danbury store, but the current economic conditions have put these plans on hold. Sales: Most of the sales are to the established wholesale customers. The process begins with the customer and salesperson creating a design. The customers usually purchase product for more than one house or project (condominium or apartment). The order is entered into the computer system by the salesperson at the store. The system assigns an internal sales order and includes the date the order was actually received. The managers are notified of the order, usually by the salesperson, and must approve the customer's credit. Once the credit is approved an invoice number is assigned to the order and an expected delivery date. The orders are then available to the warehouse and a shipping clerk puts the order together and ships it out. An actual delivery date is entered when the merchandise actually leaves the warehouse. Retail sales do not have an order as all these sales are picked up at the time the sale is made. Bill's has attempted to get retail customers to provide similar information to the wholesale customers so they can create a customer list for each store. The customers are reluctant to do this so there has been some talk about providing some sort of incentive such as a discount for customers that buy over $500 a year. Cash Receipts: For retail sales the customers have four options; Cash, Check, Credit Card, or Debit Card. Because of the liability of keeping credit and debit card numbers the system does not keep them in the system, but check numbers are added to the system when they are accepted. Each retail sale includes a tax amount as well as the payment for the inventory items. For wholesale sales the customers are allowed a number of payment options. First, they can pay the whole amount immediately. Customers that pay for the entire amount in the first ten days, including on the first day are given a 2% discount. Customers that have good credit are allowed to pay 10% at the time of the sale and the remainder after thirty (30) days. Finally, those customers that have exceptional credit are allowed to pay the nothing at the time of the sale and the entire amount after thirty (30) days. The credit worthiness of the customer is determined by the manager or assistant manager if the manager is not available. If a payment comes in on a day that the particular store is not open or on a day when a cashier is not able to enter the payment the due date of the payment is entered so the manager can keep track of late payments. When a payment is received from a wholesale customer a remittance number is assigned to the payment, but retail sales use the invoice number as the identifier for the cash receipt. This is because a wholesale sale could potentially have more than one payment, but a retail sale is completely paid for when the sale is made. Returns: Bill's Electronics does allow returns of items as long as they have not been opened or if there is a defect with the merchandise. Each return is assigned a RMA (Return of Merchandise Authorization) when the manager or assistant manager approves the return. For retail sales the date of the authorization and the date of the return as the same, but for wholesale sales there is an approval date and return date which may be different. The return date is entered by the warehouse clerk when the merchandise is inspected and put back into inventory. Commission payments: Each salesperson is paid a base salary and commission based on 1.5% of sales. This is calculated on sales at the end of each month. This is paid in the first paycheck of the following month to take account of merchandise returned from sales in the previous month. If a salesperson quits the final commission check is withheld for a month to take cover sales returned. Managers and assistant managers are paid commissions at the end of the year if their sales are above a certain level. This is to encourage management to work with salespeople in designing systems and in finding new business for the store. The Providence and Boston management have their levels set much higher than the other stores as they have the benefit of having additional retail sales. The table below shows the commission rates for managers and levels for each store: Store Albany Boston Danbury Greenfield Hartford Providence Springfield Sales for the first eleven months of 2008 $423,987 $815,489 $575,265 $123,216 $521,821 $1,317,635 $375,203 . 5% commission level .9% commission level 1.3% commission level 2.5% commission level $500,000 $800,000 $600,000 $100,000 $600,000 $1,400,000 $400,000 $550,000 $900,000 $650,000 $150,000 $650,000 $1,600,000 $450,000 $600,000 $970,000 $700,000 $200,000 $700,000 $1,800,000 $500,000 $650,000 $1,000,000 $750,000 $250,000 $750,000 $2,000,000 $550,000 The rate for assistant managers is half that of the managers. Bill's Electronics Database The database you have contains the sales, cash receipt, and returns (revenue cycle) from the beginning of December 2008 to the first weeks of March 2009. There are various reports available to the auditors (you). When you open the database you will see \"Security Warning\" and an \"Options\" button. Click on the \"Options\" button and a \"Security Alert\" window opens. You select the \"Enable This Content\" option and then \"OK\". This will reopen the \"Login\" window. To sign on as an auditor you need to use \"Auditor\" and the username and password. After you login in you will get to a main menu page. There are selections to input transactions, but these options are not available to you. Each store has its own documents and assigned numbering system. Store Albany Boston Danbury Greenfield Hartford Providence Springfield Numbers assigned 150000 160000 170000 180000 190000 200000 250000 The documents used are as follows: Transaction Type Sale Wholesale Cash Receipt Retail Cash Receipt Sales Order Return Authorization Document Prefix IV RM IV (same as sale) SO RMA This means that a Sales Invoice for the Albany store would be identified as IV150121 for example. Wholesale cash receipts are number with a remittance advice number while cash receipts for retail sales have the same number as the sale IV161233 for example might be a retail sale and cash receipt for that sale at the Boston store. Employee and Customer numbers are not assigned by stores and are unique across the entire company. Wholesale customers usually (and for this set of transactions) deal with a single store. Retail customers do not necessarily buy only from one of Bill's stores, but because not many have been assigned customer numbers this is hard to trace. Assignment: You are to use the reports made available to you to see if you can find some unusual transactions. What you are to do is to document what information you used, why this was considered important. What led you to look at that information (indicator)? And then finally present the information you believe indicates that there is a possibility of a fraud occurring, why, and the dollar value of the damages. Answers to these fraud determinations: What makes you believe there is an intentional error? Is it Material? Did Bill's rely in this intentional error? The damages to Bill's are??? Username and pw are Auditor