FRAUDD EXAMINATION
Case 4
Stephanie Adkins is an accountant who is trained in forensicaccounting. She is an experienced fraud investigator. She wasrecently hired by Lake Side Hotels, a closely-held corporation, toinvestigate a company manager who is suspected of taking kickbacksfrom vendors.
Stephanie gave Lake Side her standard engagement letter statingthat the scope of the engagement would be limited to investigatingonly one suspect. It did not guarantee findings or results.
According to the provisions of Stephanie’s engagement, she wasto communicate directly with Bernie James, the company’scontroller, and Amanda Peterson, the outside attorney.
At the first meeting of this team, Bernie indicated that LakeSide had received four separate anonymous tips about possiblekickbacks. All the tips indicated that Laurie Miller, an eveningmanager, was taking kickbacks from food vendors. One tip named aparticular vendor, the Mid States Beef Source, a company thatsupplies meat to the hotel’s restaurants.
Stephanie asked if Bernie had any documentation that supportsLaurie Miller’s possible involvement in kickbacks. Bernie had nodocumentation but hoped Stephanie could help them substantiate theinformation from the anonymous tips. He was concerned thatkickbacks would hurt the hotel financially.
Amanda, the outside attorney, said that she had already talkedto several hotel employees and was convinced that Laurie wasguilty.
Kickback schemes can be difficult to uncover, so Stephaniewanted to proceed cautiously.
Bernie wanted to confront Laurie immediately. He was convincedshe would confess if he told her that he had evidence againsther.
Stephanie asked what evidence Bernie had. Bernie said, “Only theanonymous tips, but I know she will confess if we bluff.” It wasagainst Stephanie’s professional principles to lie and she saidso.
“Detectives do it all the time on cop shows,” Bernie said.Stephanie insisted she would need to run the investigation her wayor she wouldn’t be able to undertake this engagement.
In relation to this scenario, write responses to thefollowing:
What steps might Stephanie follow to proceed with herinvestigation?
What mistakes, if any, have already been made in theinvestigation?
