Fraud Detection, Investigative Techniques – Case Study Report

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Fraud Detection, Investigative Techniques


The current paper provides the description and analysis of the fraud investigation of the given case study. The major emphasis is made on the following fraud investigation procedures: determination of the scope of fraud investigation used approach, findings, summary, and impact on the victim organization. The information, analysis, and outcomes provided in the current work enable us to understand the whole process of fraud investigation on the example of the situation close to real life.

I. Background

According to the case study, the Fraud Risk Response Team of Plasticell Pty Ltd received an anonymous telephone call through a fraud hotline. In fact, this hotline was created for the encouragement of the company’s employees and stakeholders to call and inform about any suspicions of fraud that may relate to Plasticell Pty Ltd. As stated in the case study, this whistleblower hotline works 24 hours a day and provides immediate response and the first line assessment.

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As the case study informed, the discussed call provided the notion that Fraud Risk Response Team should pay the additional attention to the work of David S. (Ogudam and Albert 2015). This person worked for Plasticell Pty Ltd on the position of the Plasticell Purchasing Officer. The employee worked in the manufacturing facility located in Manila. Actually, David S. was under the accusation of providing extreme favorable actions to Promos Machinery. Therefore, he was suspected of obtaining favorable treatment from this company. Promos Machinery acted as the seller of machinery parts to Plasticell Pty Ltd because of close interrelationship between David S. and Plasticell Pty Ltd. Moreover, the hot line call informed that the suspected individual was the partial owner of Promos Machinery. The caller stated that David S. had direct family relationships with the director of this company. In fact, the director was David S.’s father-in-law.

In addition, the suspicions were supported by the following events, which could be connected to the fraud but could not present a strong evidence:

· The photocopy of the e-mail from David S. to Michael B. was found on Wednesday. B. worked on the position of the UK expatriate sales representative of Promos Machinery. The e-mail concerned the business relationships that were beneficial to the parties involved. Moreover, Michael B. was under suspicion in his organization due to possible close relationships with some other organizations, which could harm the interests of his employer. The suspicions started to gain grounding due to the fact that Michael B. had expensive taste in clothes and automobiles. Actually, the employee had the exceptional right to contact with some vendors and manufacturers.

· David S.’s lavish lifestyle that was reflected during the holidays in Hawaii, when he enjoyed expensive dinners and spent time in night clubs;

· The absence of obvious motive to slander against David S.;

· Two-year long on-going affair with company’s bookkeeper Jasmine W., who had the authority of cheque-signing;

· Jasmine W.’s possible dissatisfaction with her life because of unemployed and depressed husband and personality traits and behaviors (like, unwillingness to share duties), which could result in formation of fraud behavior;

· Luxuries at W.’s house (cars and swimming pool);

· The unwillingness of Jasmine W. to decipher company’s accounting system the Byzantine to the managing director Mr. B.;

· The unwillingness of W. to share the methodology of work with other employees in order to proceed smooth working process, when she was out of office.

Such a predication served as the facilitator for the conduct of fraud examination. The examination involved the investigation of W.’s office rooms, the survey of her computer, the analysis of the financial documentation found in her office room, the comparison of the documentation to the one provided by banks, the survey of car of David S., the interview of Jasmine W., and the analysis of activities of the involved individuals.

II. Executive Summary

Actually, the background to fraud examination was laid, when Fraud Risk Response Team of Plasticell Pty Ltd obtained anonymous telephone call. The unknown person said that the company’s Purchasing Officer David S. provided extreme favoritism to the seller of machinery parts Promos Machinery because of the existence of direct family relationships with the director of the company. Moreover, David S. was noted to be the partial owner of Promos Machinery. Numerous factors existed, which formed the assumption that David S. could perform fraud in Plasticell. In addition, David S. had close intimate relationships with Jasmine W., who worked on the position of a bookkeeper with the cheque-signing authority. Both individuals had lavish lifestyle. What is important, Jasmine W. reflected the unwillingness to disclose the particularities of the work and to decipher company’s accounting system the Byzantine. The anonymous telephone call accompanied by multiple factors served as the facilitator of commencement of fraud examination. In fact, the actual investigation started after obtaining of financial documentation by one of the company’s owners.

Actually, the members of fraud examination team obtained the second anonymous call. The same unknown person stated that David S. received kickbacks from the suppliers and transferred funds to the Australian company PlasticsBolts Ltd. What is important, David S. leaded the company. Moreover, Jasmine W. was connected to this company, as she put the invoices from the company in consideration.

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In fact, the members of examination team performed the investigation of Jasmine W.’s working computer and the survey of her locked file cabinet. The examination team found the financial documentation that supported the transmission of funds from Plasticell to PlasticsBolts through factious invoices in the form of payment to the supplies, which have never existed in real life. Actually, the funds were transmitted to the person under the name Judy W., whose account No. actually belonged to Jasmine W. Thus, the analysis of the documents and their comparison to the banking documentation enabled to identify that Jasmine W. performed misrepresentation of financial information, credit card fraud (payment for personal expenses, like bags) and cheque alteration. In addition, the information obtained during the interview with Jasmine W. supported her guilt. The analysis of the situation brought the understanding that the commitment to fraud became possible under the influence of the following facilitators: insufficient separation of the duties inside the company, exceptional access to credit card by only one person, the use of this card to cover the needs of several employees, and insufficient accounting experience of the supervisor.

At the same time, the documents, which supported the notion that David S. performed the fraud, were not found. In fact, the existence of direct family relationships with the director of the company, which sold the machinery parts to Plasticell, technically supported the notion that the employee could act as the Politically Exposed Person between Plasticell and Promos Machinery.

The fraud examination team found the evidence of fraud commitment by Jasmine W. However, the commitment of fraud by David S. was not proven. The team technically supported the notion that David S. acted as the Politically Exposed Person between Plasticell and Promos Machinery

III. Fraud Investigation Procedures


The goal of the fraud examination was to determine the potential of fraud commitment by the Plasticell Purchasing Officer David S. and the bookkeeper Jasmine W. against Plasticell. The examination was initiated after the anonymous telephone call that informed about possible fraud interrelationships between David S. and the representatives of Promos Machinery. Moreover, the examination considered the fact of close relationships between David S. and company’s bookkeeper Jasmine W., who had cheque-signing authority in the combination with the basic financial documents obtained by the company’s co-founder Mrs. Barton.


Fraud examination team members

· Mrs. Barton (the administrator, one of the owners of Plasticell Pty Ltd) acted as a management representative;

· Mr. Barton (a managing director, one of the owners of Plasticell Pty Ltd);

· Tobi Muir (an accountant, who replaced the suspected Jasmine W. during her annual leave);

· The external accountant;

· Shaun (the IT forensic expert);

· The forensic accountant.


The following documents were reviewed:

· The invoice on PlasticsBolts from Plasticell for $ 5,000;

· TAB documents (betting the tickets and account for August) on the name of Judy W. The account evidenced two cash payments of $ 1,000 and two cash payments for $900.

· Maymex receipts, including the receipts from Hugo Boss for $ 3,000 for the suit and the receipt from Chanel Sydney for $ 5,000;

· Numerous Northpac bank statements on the name of Judy W. (including two payments of $ 15,000 on the August bank statement from Plasticell into the account of Judy W.);

· Northpac ATM Visa card receipt notice;

· Plasticell cheque books, cash disbursement files, and petty cash dockets;

· Financial documentation provided by NSW Admin Bank (financial institution used by Plasticell) for the period from September 2015 till September 2016;

· The statements of Plasticell Maymex credit card for the period from September 2015 till September 2016;

Individuals interviewed

· Jasmine W.


Before starting the fraud examination, Fraud Risk Response Team performed an initial assessment of the obtained suspicions. The assessment was performed for the following reasons:

· to determine whether the performance of examination is necessary;

· to identify the steps, which should be taken in order to provide the appropriate response to the predication.

In fact, Mrs. Barton considered that fraud examination should be performed after the basic financial documents from the credit card vendor and a bank were obtained.

After the formation of fraud examination team, it was divided in order to undertake field investigations.

Actually, the second anonymous telephone call from the same person provided the response team with the information that David S. had been obtaining kickbacks from various suppliers, including the representative of sales department of Promos Machinery. In addition, the anonymous person stated that David S. transferred funds to the Australian company PlasticsBolts Ltd that operated under his running. In fact, the suppliers got their money back through inflation of the price. Moreover, the anonymous stated that Jasmine W. (the company’s bookkeeper, who had cheque-signing authority) was involved in fraud. Thus, she was accused of inflating the prices, retaining the mark-up for herself, and providing unreal invoices from the PlasticsBolts Ltd.

The fraud examination team intended to perform the computer-based survey in Manila and NSW that supported the suspicions. In order to avoid the disclosure of the actions of the team, Jasmine W. was sent to the annual leave.

Moreover, the members of the team have performed the investigation of Jasmine W.’s working computer and the survey of her locked file cabinet. Thus, the team has found the following evidence:

· The factious invoice on PlasticsBolts from Plasticell for $ 5,000 for the machinery elements was found in the top drawer; the machinery parts were not actually supplied because PlasticsBolts did not actually co-worked with Plasticell. In addition, the invoice obliged to pay the fee on the account of the manager of PlasticsBolt Judy W., whose address corresponded to the address of Jasmine W. Thus, the finding supported the notion that Jasmine W. committed fraud against Plasticell and obtained the funds on her account.

· TAB documents, which evidenced the cash payments to Jasmine W., were found in the second drawer. Actually, the documents supported the fact that Jasmine W. had direct connection to purchasing the bag for herself and the suit for David S. because cash receipts for those commodities were found in her cabinet.

· Judy W. represented the name used by Jasmine W. for the redirection of the funds from Plasticell to PlasticsBolt, as the address of a Northpac ATM Visa card receipt notice corresponded to the address of Jasmine W. Actually, Nortpac was the financial institution used for the redirection of funds. The suspicions against Jasmine W. were supported by the fact that the account No. on the PlasticBolt invoice belonged to her.

· Plasticell cheque books, cash disbursement files, and petty cash dockets, which were found in the gym bag of W. inside the staff room, reviled the criminal actions performed by Jasmine W., but could not support the notion of fraud committed by David S. No evidence was found during the survey of Alpha Romeo car David S. drove. In fact, the fraud investigation team found only numerous folders, one of which was marked PlasticsBolts, but it could not serve as the evidence of fraud.

The part of the examination team (the management representative Mrs Barton and two investigation team members, one of which served as a forensic accountant) has taken the documentation found in the cabinet of Jasmine W. and has gone to the financial institution used by Plasticell (NSW Admin Bank). Together with the officers, they have checked the financial documentation for the period from September 2015 till September 2016. In fact, they have found the discrepancies between the cash disbursement files of the company and petty cash cheques of the bank. The team found out that the petty cash cheques of the bank were significantly higher. Such a fact evidenced conscious misreporting and fraud performed by Jasmine W.

Mrs. Barton with two representatives of fraud examination team (one of which was a forensic accountant) visited Maymex. What is important, they negotiated with the security administrator and compared the statements of Plasticell Maymex credit card for the period from September 2015 till September 2016 to the documents found in the cabinet of Jasmine W. In fact, the investigations evidenced Maymex credit card fraud (for the payment for personal expenses) and cheque alteration performed by Jasmine W. Thus, she performed general ledger entries for the asset accounts.

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Actually, further investigation supported the guilt of Jasmine W. The examination team revealed that Business Number of PlasticsBolt was registered on the name of Judy W..

The analysis of the situation enabled to determine the factors, which had enormous influence on fraud occurrence. The crucial factors are the following:

· The lack of separation of duties in the accounting system of Plasticell;

· The exceptional access to Maymex credit card of a single person;

· The use of the credit card as a single card for numerous company workers;

· The lack of accounting experience of an immediate supervisor, who assessed the work performance of a bookkeeper.

In order to determine the guilt of David S., the Philippines fraud examination team initiated the investigations. In fact, they technically supported the existence of the direct family relationships between S. and Promos Machinery. No other support of fraud performed by David S. was found. However, the investigation did not support the information provided by the whistleblower regarding S.’s relation to commercial bribery with local officials for concealing environmental licensing discrepancies.


In fact, the report reflects that Jasmine W. (Plasticell’s bookkeeper, who had cheque-signing authority) has performed misrepresentation of financial information, credit card fraud (for payment for personal expenses) and cheque alteration for about four years of her employment in Plasticell. However, no direct evidence of fraud performed by David S. (Plasticell’s purchasing officer) was found. The examination team only technically supported the notion that this employee could act as the Politically Exposed Person between Plasticell and Promos Machinery because of his family relationship with the director of Promos Machinery.


The case has provided the financial documentation that enables to estimate the part of the loss of Plasticell. In fact, the loss amounted to $ 29,900. Actually, the entire effect of the loss cannot be determined because the financial data is not provided for the time period, when the fraud was committed.

The fraud has a significant influence on the decision-making process inside the organization. In fact, the directors did not have a clear picture of the financial expenses, as the participant of fraud provided incorrect financial data. The inability to evaluate the real performance of the company caused the establishment of inappropriate strategies, which did not align with the real performance of the company (Isa 2011). Moreover, the fraud caused the increase in the financial pressure and the inability to perform the working process in the adequate manner due to the lack of resources (Duke & Kankpang 2012). In such a manner, fraud can result in the insolvency and even bankruptcy of the company (Fraud-Stoppers n.d.).

Actually, the fraud has an enormous negative impact on the relationships between the discussed organization and the partners. Such a fact is reflected in the enormous damage to the company’s reputation, the lowering of profitability of returns, and the decline in competitiveness (Todorovic 2013).

What concerns personal understanding, the case of fraud provided a strong example of negative behavior to all the employees of the organization. All of them have observed the lavish lifestyle of Jasmine W. and David S. for a long time. Moreover, numerous individuals have had a clear idea about the level of salaries of these employees, as they have understood that all the luxuries could not be purchased on official payment. Thus, the rise of suspicions in fraud is obvious. At the same time, the employees observed that no sufficient steps were taken in order to investigate that situation till the anonymous telephone call took place. So, the commitment of fraud has not been investigated for years. Moreover, the financial documentation has remained improperly checked for a long time. Such a situation may formed the strong idea that other employee may commit fraud and remain undetected.

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This section provides several recommendations, which will help to minimize the possibility of fraud commitment by the employees in future. In fact, this statement is based on the understanding that “permissive work opportunities” serve as one of the major facilitators of fraud behavior formation (Jackson et al. 2010, p. 162). The major recommendation is to provide adequate internal control system for the employees actions (Ogudam & Albert 2015). Sucha system can be realized through high quality business and financial expertise (Kummer, Singh & Best 2014). The significant decrease in the possibility of employee initiation purchase orders for personal commodities, use of corporate credit cards for personal expenditures, and setting up unreal vendor acounts can be reached by the application of fraud tests (Gabrielle 2001). Moreover, regular review of bank statements may reveal the misrepresntation of fiancial data and detect the fraud at the early stages of its commitment. In addition, the managers of the organization should segregate the duties and responsibilities among several employees in order to reduce the dependence and power of a single worker (‘Asset Misappropriation Fraud’ n. d.).

Martin S. Bressler (2009) in his researches has noted that the prevention is one of the most cost-effective means of fraud addressing. Moreover, this statement was supported by the research presented in the article ‘Effects of Internal Controls, Fraud Motives and Experience in Assessing Likelihood of Fraud Risk.’

The additional attention should be paid to the improvement of ethical leadership inside the company, particularly, to such factors as increase of trust and commitment to corporate goals (Bello 2012). Moreover, the employees should be truly devoted to their organization and its core principles. Such attitudes can be revealed during closer interaction (Jackson et al. 2010). In addition, the management should create a working environment, where the employees feel fraud and pay attention to suspicious signs (Jennings 2016). Such signs may be reflected in the discrepancy of financial information and behavior of workers. What is important, the organization should have a strong policy of detection and addressing of fraud. In such a manner, fraud prevention policies should concern the decision-making process of each individual (Jackson 2015).

One more recommendation involves the performance of additional external control by the impartial and highly professional accountants. Such a control can be realized through post facto audits (‘Business Fraud: Culture Is the Culprit’ 2014).

Moreover, it is recommended to apply the technology to the company’s financial accounting (Goodwill 2010). The technological solutions act as the strong barriers to fraud prevention because their use complicates the issuance of unreal invoices and simplifies the track of the real expenses.

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