Midterm Exam Option #2 – A SPACER General Evaluation
Corporate Fraud most likely Scenario
The vision of STAPLES Office Solutions, Inc., a Business company, is to be the leader in providing innovative products and services that enable our customers to manage document workflow and increase efficiency. To facilitate this goal management is responsible for establishing and maintaining an adequate system of internal controls to provide reasonable assurance that the mission and objectives of the organization are achieved. As a Sr. Financial Analyst on the business information team the main fraud risks that affect my position and may impede STAPLES’s ability to reach these objectives are; ...view middle of the document...
Each VPN number is recoded on the sales contract and tracked throughout the lifespan of the machine by a team of analyst, like myself, to plan future results for investors or to increase profitability by machine, contract, labor, location or any of several other variables. Only if the machine is returned and deemed not worthy to be resold will it be broken down and sold for parts and the VPN retired. A machine that can be resold or used in our leased fleet with extensive modification will be given a new VPN based on the original base unit and the accessories installed similar to a salvage title.
Any service or repairs done to a machine requires the service technician to electronically scan the VPN number as he starts works and when he completes the repair. These scans are recorded off site and used to track the machine, the print counts, and its location. It also tracks the hours needed to complete the required work, the companies serviced and the expenses of the service technicians. With these controls we have reasonable assurance that sufficient segregation and preventative controls are in place to protect our printer fleet from internal theft.
On the other hand ink and toner can be used in several different machines is extremely expensive is stored and shipped in bulk and easily converted to cash, through auction sites or by direct selling to other businesses. In addition, our service contracts account for free toner and ink for the first year and there is no tracking numbers on these items. This opens the door for larceny schemes, asset requisitions and transfer schemes, purchasing and receiving schemes and false shipments schemes. Although not common service technicians or warehouse employees have openly taken boxes of these items. While most service technicians do not have direct assets to supplies which are either shipped directly to customers or preloaded on service vehicles based on scheduled appointment. It may be possible for service technicians to requisition extra toner and not deliver it to the company being serviced. As our company is a manufacture of only printers the inks and toners used is often sub contracted and need to be requisitioned from our vendors. A supply chain employee could possibly claim a shortage on a shipment and remove the excess for his own use or to sell outside company channels. Also our customers have the ability to requisition additional inks and toners as needed again at no additional cost.
While these frauds are always possible the concealment of these thefts would be difficult and several measures have been put in place to both prevent and detect asset misappropriations. Segregation of duties at STAPLES is taken very seriously. No one person has control over the entire order cycle of supplies that enter or leave the warehouse. Service technicians have limited access to assets and need to requisition supplies from the warehouse. The warehouses themselves have security cameras...