Maxwell Case

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This report deals with the internal investigation of fraudulent activities committed by Anna Thomas of Maxwell and Company. The investigation determined that Anna had been making personal charges and cash withdrawals on Rusher Automotive’s credit card for two and a half years. Introduction

The accounting profession believes there are three conditions necessary for fraudulent behavior, as well as a responsibility to to perform quality services with integrity, objectivity, and professionalism. Accounting firms have the responsibility to hire and monitor competent personnel, so they can fulfill their assigned responsibilities. This report will explain how all three conditions were present in Anna’s actions, how Max and Company failed to uphold quality, and describe Anna’s background.

In the Maxwell case three elements where present that allowed fraudulent activities to occur in the Rusher Automotive company. The first element discovered was opportunity. Maxwell & Company assigned one accountant, Anna Thomas, to this client, Rusher Automotive. Anna did all bookkeeping work, recording journal entries, preparing checks for bills financial statement reporting for this client and she also did regular daily work like taking the deposit to the bank for the client. This gave her the utmost of opportunity to do whatever she wanted with the funds. The next element was exposed was pressure. Anna had overwhelming pressure to provide for her family. Her husband was on disability and provide very little to the family finances. After her working a menial job with no college degree their debt escaladed. She then had the pressure to pay for her college and raise two children. She also had the pressure for a nice home and car. After obtaining those items, she had the pressure to continue to pay for them. Lastly, rationalization was revealed. From the beginning Anna had the attitude of “deserving” for her work. She felt she deserved higher pay for the work she performed. Although, she did perform work with high standards and commitment she was not paid as high as she thought she should. She also had the mentality that because she finished school working and with a family she should be rewarded. Jerry didn’t discover fraudulent behavior from Anna at other clients because he was familiar and pleased with her work ethics at a recent job she was hired for. Therefore, he didn’t use his physicals controls to check on her frequently to make sure she was doing her job with integrity. Kate Conrad didn’t perpetuated fraud at Rusher prior to Anna’s hiring because she does not have any incentive of financial needs in life; she did not need to work due to a large inheritance. Kate was a smart, successful CPA who enjoyed the challenge and the camaraderie of working in an office. Definitely, the fourth element of the fraud diamond is present in this case, which is called capability. Anna Thomas has the necessary traits and ability to commit the fraud. For example, there were no internal controls set up because they trusted Anna with their work. Moreover, she did all aspects of the accounting work; there was no separation of duties. This opened of the window of opportunity. Maxwell did not check her references; he only trained her for one day at Rusher instead of three; he did not bother to check Anna’s work so she had total control over the account; Maxwell should have realized that since Rusher was not experienced in accounting that he should at least check on her periodically-especially since she was the only accountant assigned to the client and because his reputation of integrity and quality services was so high, it was a major risk not to double check and make sure. Anna’s co-workers could have brought it to the attention of Maxwell about her rapid change of lifestyle, especially since she complains that she feels she is not making enough money. Since fraud is most commonly committed from...
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