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Fraud, Embezzlement, and Investigation

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Donald Reynolds, director of the internal auditing department, received an anonymous tip from an employee in one of the high tech manufacturing plants. The employee noted that there was a major embezzlement taking place in one of the divisions. Internal audit had completed a routine review of internal control of that division the previous year and found that the control system was properly designed and operating effectively. Only minor recommendations were made, and the next review is due 3 years later.

The employee noted the erratic behavior and lavish lifestyle of the plant controller and stated that the controller has been overriding existing controls, which would prevent any audit from being able to detect the embezzlement. The plant controller is well-respected and highly trusted by the CEO and CFO, and their families are involved in the same civic and religious organizations. Investigating the plant controller could cause considerable disruption in the company and the personal lives of the employees.

Please answer the following questions. As you answer each question, you must provide support or evidence that will enhance and empirically prove your answers. Academic criminal justice articles or real life criminal justice findings that are not found in journals or other academic sources must be used in supporting your answers. Please use APA style for all cited sources including your resource page.

â?¢Given the situation, discuss some of the options the company has for handling this situation.
â?¢Assuming you decide to investigate these allegations, describe the investigation steps.
â?¢In preparation for the interviews, note the order of the witnesses who would be interviewed and how you would plan, conduct, and document your interviews.
â?¢Discuss how you would conduct an admission-seeking interview of the plant controller.

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Solution Summary

The solution analyzes how to properly investigate a situation in an organization where an employee is alleged to have committed fraud.

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Given the situation, discuss some of the options the company has for handling this situation.

These are the options available for the company.
1. Investigate the matter. Investigating the issue will create a psychological view that the company means business and this will warn those who will attempts to steal from the company.
2. Ignore the matter. If this is done, this will create confusion and chaos in the company. The employees will not take the management seriously. And corruption within will worsen.

Assuming you decide to investigate these allegations, describe the investigation steps.
Torrance, Zaino and Levine (2007) suggested the following steps in the investigation process:
"Step 1: Determine whether an investigation is necessary. Gathering some evidence by interviewing the concerned personnel is necessary. This step will justify doing a full blown investigation.
Step 2: Determine whether interim relief is necessary. To avoid unnecessary disruption and awkward situation, those involved in the allegation should be given "temporary transfers, reassignments, or paid leaves". This is necessary to avoid emotions from taking over the investigation. This will also avoid the alleged perpetrators to harass witnesses.
Step 3: Determine who should conduct the investigation. Top management must assemble an impartial investigating committee to handle the situation. Those with affinity to the alleged perpetrators must be excluded in the committee.
Step 4: Preserve, obtain, and review all relevant documents. Witnesses must be encouraged to produce any documents that they possess that will prove the allegation. Management must also assure that the company documents are open for the investigators to peruse.
Step 5: Review potential legal issues. The managements must consult the company lawyer to make sure that the investigation is flowing based on legal mandates and statutes.
Step 6: Determine time and place to conduct investigation. The investigating committee must select a room within the vicinity of the office building. The room must be free from interference and must be certified ...

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