Case Study For Unit 4 Assignment Emerel Company

Case Study For Unit 4 Assignmentemerel Companyyou Have Been Assigned

Case Study for Unit 4 Assignment Emerel Company You have been assigned to the Emerel Company embezzlement case by the owner of your CPA firm. The president of Emerel Company, as previously noted, has told you that Susan Smith, the assistant bookkeeper, has reported the suspected fraud. Susan has been filling in for the head bookkeeper, Mary Chernet, while Mary has been off for a couple of days. The president told you this is the first vacation that Mary has taken in three years. While reconciling the company’s bank statements, Susan has found discrepancies in payees on checks.

Susan has found checks written to credit card companies (Emerel does not use credit cards) and large reimbursements to Mary Chernet. To analyze this case of fraud, you first need to gather some evidence, to give you some background on the company and the fraud suspect, and also to prove the fraud and calculate the fraud loss for Emerel Company.

Paper For Above instruction

The Emerel Company embezzlement case presents a compelling scenario that underscores the importance of forensic accounting in detecting and investigating internal fraud. The case involves Susan Smith, the assistant bookkeeper, who reports discrepancies during bank reconciliations, raising red flags about potential fraud committed by the former bookkeeper, Mary Chernet. In this paper, I will explore the background of the company, profile the suspect, analyze the evidence gathered, and outline steps to prove the fraudulent activity and quantify the financial loss suffered by Emerel Company.

Understanding the context of Emerel Company is crucial. While specific details about the company's size, industry, or financial health are not provided, it is apparent that the company relies on diligent bank reconciliation processes, a standard internal control practice. The discovery of checks made payable to credit card companies despite the company not using credit cards suggests a falsification of records or misappropriation of funds. These anomalies hint toward a deliberate attempt to conceal unauthorized transactions. The fact that the discrepancies were found by Susan, who was filling in temporarily, underscores the importance of segregation of duties and regular review of financial records as preventive controls.

Profiling the suspect, Mary Chernet, involves examining her tenure, role, and financial history within the company. The fact that this is her first vacation in three years indicates her long-standing presence and possibly high level of trust placed in her by management. Long-term employees with access to cash and accounting records are often prime suspects in internal fraud cases. Large reimbursements to Mary raise questions about the legitimacy of these transactions. Such reimbursements could be personal expenses disguised as legitimate business costs or outright embezzlement. To substantiate these allegations, further evidence must be gathered, including reviewing her expense reports, bank account statements, and any communication or files that could reveal fraudulent activities.

Gathering evidence is a critical step in forensic accounting. This involves collecting financial documents such as bank statements, check copies, expense reports, and internal emails. Conducting interviews with staff, especially those involved in financial transactions, can provide insights or testimonies that support suspicions. Digital forensics may also be necessary to analyze electronic records for inconsistencies or hidden transactions. The purpose is to establish a clear link between suspected activities and financial records, demonstrating that the checks written to credit card companies and reimbursements to Mary Chernet are unauthorized or fictitious.

To prove the fraud, the forensic accountant must establish the intent, actions, and financial impact. This involves reconciling documents, detecting falsified or altered records, and tracing unauthorized cash flows. For example, examining canceled checks, bank deposits, and internal ledger entries can reveal discrepancies. The analysis might show that checks intended for legitimate expenses were diverted to personal use or fictitious payees. Additionally, the accountant can use analytical procedures such as ratio analysis or trend analysis over time to identify irregularities in financial patterns that corroborate the suspicion of embezzlement.

Calculating the financial impact on Emerel Company involves quantifying the amounts diverted or stolen. The key is to determine the total value of checks written to non-existent payees, reimbursements made to the suspect that lack supporting documentation, and other related financial losses. The accountant must also consider indirect costs, such as increased audit fees, legal expenses, and damage to the company’s reputation. Precise documentation of these losses is vital for potential recovery actions, insurance claims, or legal proceedings against the suspect.

In conclusion, the Emerel Company embezzlement case highlights the importance of internal controls, vigilant monitoring, and prompt investigation when irregularities surface. Forensic accounting plays a vital role in uncovering hidden fraud, establishing the facts, and quantifying losses. Through thorough evidence collection, suspect profiling, and meticulous financial analysis, the CPA firm can support Emerel Company in resolving the incident and strengthening its internal safeguards to prevent future occurrences.

References

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