Submitted by: Submitted by hscott12
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Category: Business and Industry
Date Submitted: 07/15/2013 05:53 PM
Case Study 1
Chapter 3: Wooten Fraud
Case Study 1
A. Which internal control activity was violated in order for Mr. Peterman to perpetrate this fraud?
In the case of Mr. Peterman it seems that there could be a number of internal control activities that were violated like authorization and segregation of duties. It seems that even though the duties were segregated, no one checked to make sure the correct people were signing for the checks and inputting them into the system.
I believe the main violation was from control activities. According to the Office of Financial Management, “managers set up control activities to provide reasonable assurance that the agency and business unit objectives are met. An example of a control activity is something as simple as listing tasks assigned to staff members and then periodically checking the list to verify that assignments are completed on time” (2010). It is apparent in this case that certain employees were supposed to log checks into the computer and prepare receipts; while someone else was supposed to verify the amount on the receipt and a third employee needed to make the bank deposit. It is obvious these things were not check on frequently, if at all. I feel this is how Peterman got away with so much.
2010. State administrative and accounting manual. Office of financial management.
Olympia, WA. Retrieved from website: http://www.ofm.wa.gov/policy/contents.asp
B. Do you consider this case to be an example of management fraud or employee fraud?
Considering that this embezzlement was performed by Wooten’s CFO, I would consider this to be in the category of management fraud. It seems very likely that Mr. Peterman could have been the employee assigned to making sure the receipts and deposits were signed and checked, he could have overrode what the employees should have been doing and since he was the CFO, none of the employees questioned him. According to Gottlieb “Management Fraud often...