Questions: 1. Describe the symptoms of fraud that might be evident to a fellow employee. 2. Recently, his employer has been putting more emphasis on controlling costs. With the slowing of overall technology spending, executives have ordered managers to closely monitor expenses and have given vice presidents greater responsibility for balance sheets. What positive or negative consequences might this pose to the company in future fraud prevention? 3. As discussed previously, all frauds involve the following key elements: perceived pressure, perceived opportunity, and rationalization. Describe two of the key elements of the Jones fraud— pressure and opportunity. 4. From the scenario, what measures has the company taken to prevent fraud? In what ways could the company improve?

and Explanation:

1.The following could be symptoms of fraud:

a.Posh Lifestyle: Daniel Jones drove expensive vehicles. It is clear from his site that Jones enjoyed telling people about his toys. It is likely he showed or talked about his various cars to his fellow employees. A clue to Jones’s fraud is that he began to purchase most of these expensive cars in the last ten months of the fraud, not over the period of time he worked for his company.

b.Analytics: Jones received large amounts of software free of charge to be used on developmental projects. Someone should have discovered that Jones was receiving larger quantities of materials than his colleagues. His company could also require seeing the projects Jones was working on and the reasons why he needed such large amounts of materials.

c.Internal Control deficiency: His company had no internal control checks for amounts under $1,000.

d.Unusual Behaviors: It is not one particular behavior that signals fraud but rather a change in entire behavior. Jones had worked for the company long enough that employees and coworkers would be able to tell if he was experiencing behavioral changes.

2.

a.Positive Consequences: Because managers are encouraged to have tighter control over costs, their scrutiny may prevent potential fraud perpetrators. Also, managers will take more ownership of their department because they will be in charge of a greater portion of the assets and will likely be more careful with expenses, especially if a bonus is given for keeping costs low.

b.Negative Consequences: Managers may be more tempted to commit financial statement fraud, especially if a bonus is attributed to keeping costs low/revenues high. Controls will need to be in place as a preventive measures. other non quantitative measures should be looked upn rather than monetary benefits

3.

a.Pressure: Fraud pressures can be divided into four types: financial pressures, vices, work-related pressures, and other pressures. His desire for luxuries was enough to motivate him to commit fraud.

b.Opportunity: His company had a weakness in its controls. It required approval only for software or hardware of more than $1,000. Jones had ordered software in the past for legitimate purposes. He saw that no one really checked up on him, since he was director of a very secret project.

c.Rationalization: He rationalized his unethical acts in one way or another.

4.It appears that his company tries very hard to create a culture of honesty, openness, and assistance by focusing on hiring honest people. However, his company could benefit from developing a code of ethics. In this situation, there was no overriding of existing controls; rather there were no internal controls in place on purchases of less than $1,000. His company could benefit from having some type of internal control to prevent this type of fraud from occurring in the future.

A whitsleblower mechanism should be in place where when the upper management is at fault external agencies can be contacted for prevention of fraud

You can expand on the concepts if you like

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