26. You were asked to investigate extremely high, unexplained merchandise shortages at a department store chain. Classify each of the five situations as a fraudulent act, an indicator of fraud, or an event unrelated to the investigation. Justify your answers. (Adapted from the CIA Examination)
    1. The receiving department supervisor owns and operates a boutique carrying many of the same labels as the chain store. The general manager is unaware of the ownership interest.
    2. The receiving supervisor signs receiving reports showing that the total quantity shipped by a supplier was received and then diverts 5% to 10% of each shipment to the boutique.
    3. The store is unaware of the short shipments because the receiving report accompanying the merchandise to the sales areas shows that everything was received.
    4. Accounts Payable paid vendors for the total quantity shown on the receiving report.
    5. Based on the receiving department supervisors instructions, quantities on the receiving reports were not counted by sales personnel.