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Forensic Business Investigations

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ACCT 2211: Forensic Accounting Individual Test 1

Baldor Electric Singapore

The finance manager, See Lay See, of Baldo Electric, embezzled nearly $227,000 over a 4 year period (200-2004). Through deliberate falsification of the company accounts, she successfully covered her crime.

Required: 5 + 5 = 10 Marks

1. Using the elements of fraud, explain how this case of employee embezzlement would be deemed as fraud. (5 Marks)

__________________________________________________________________________________Comments: students should consider the 7-elements (not the fraud triangle here).

– “Fraud” is deception that includes the following elements 1. A representation 2. About a material point 3. Which is false 4. And intentionally or recklessly so, 5. Which is believed 6. And acted upon by the victim 7. To the victim’s damage

This was a case of employee embezzlement (some might also suggest senior management fraud, as See Lay See was a senior manager; however, this was a non-collusive fraud situation).

The 7-elements are required for this to be deemed fraud (but note some jurisdictions take a wide interpretation of “victim” to include potential shareholders or society at large.

1. Representation – this was a claim made by See about the company accounts being true and fair

2. Material point – this was proven to be material as it induced victims, that is, there was a widespread belief that the accounts were true. The company (and other victims) decisions were based on this deception. Note material could be $1 – all that needs to be shown is that the accounts are relied upon by others

3. False – company accounts were proven to be false by the forensic accountant (See Lay See would have eventually admitted this…...

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