Research Project

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Cardinal Wholesalers, Inc.© A Fraud Examination/Auditing Case Simulation

by Thomas Buckhoff, Ph.D., CPA/CFF, CFE and Bonita Peterson Kramer, Ph.D., CPA, CMA, CIA © 2011. No part of this work may be reproduced or used in any form or by any means without the written permission of the authors. To Students: Welcome to Cardinal Wholesalers, Inc.: A Fraud Examination/Auditing Case Simulation! Pedagogical research indicates that the best way to learn is by doing. This case simulation provides you with the opportunity to learn basic fraud examination/auditing principles through hands-on active participation. A brief description of the case is as follows: This case simulation replicates the actual investigative steps that were followed in uncovering a $1.75 million fraud scheme. The case background is based on an actual cash disbursements fraud investigated by my partner, Tom O’Halloran of Forensic Solutions, LLC, and me. Since the fraud involves an on-book scheme, you can uncover the fraud by examining accounting records and underlying source documents. The vendor database contains 1,000 vendors making it too time consuming and inefficient to examine all the source documents underlying vendor payments. Using the red flags most common to fictitious vendor schemes, you must first use Excel’s AutoFilter function to narrow down the vendor list to the six most “suspicious” vendors. Using a password derived from the names of the six vendors, you will then access a PDF file containing three invoices from each of the six vendors to determine the most suspicious vendor. Next, using the Taxpayer ID number as the password, you will examine the most suspicious vendor’s recent bank statement along with cancelled checks to determine whether the fraud is a fictitious vendor scheme or a pass-through scheme. Finally, you will write a brief report summarizing the evidence and estimating the fraud loss suffered as a result of the fraud scheme you uncovered. The report should also include specific recommendations for preventing this type of fraud in the future. This case simulation increases competencies in the following areas:

� Problem solving, critical thinking, and document examination skills � Computer skills, especially the ability to query a vendor database on Excel � Technical skills relating to the detection, investigation, and prevention of fraud � Research and professional writing skills

The Student Edition contains the following files:

� Student manual containing a four-page case background, six required assignments, and a nine-page Primer on Fraud. The Primer educates you about all of the fraud examination concepts necessary for completing the required assignments.

� An Excel file containing 1,000 different vendors that you must query using Excel’s AutoFilter function.

� A PDF file entitled “Using Excel to Ferret Out Fraud” that explains how to use Excel’s AutoFilter function along with an Excel file you can practice with.

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� A password-protected PDF file containing three invoices from each of the most suspicious vendors. The password to access this file is derived from the first letter of the vendor name for each of the most suspicious vendors.

� A password-protected PDF file containing a monthly bank statement including cancelled checks for the most suspicious vendor. The password to access this file is the Taxpayer ID number for the most suspicious vendor.

� A password-protected PDF file containing a summary of all payments made to the most suspicious vendor. The password to access this file is the Taxpayer ID number for the most suspicious vendor.

� A PDF file containing Testimonials from various professors and students who have used/completed the case simulation.

� A PDF file containing authors Thomas Buckhoff and Bonita Peterson’s biographies. This case simulation is copyrighted and you must purchase your own copy. To discourage unlawful piracy, we have set a reasonable per unit price of $18. Questions concerning the case simulation should be directed to your instructor. Welcome to the exciting world of fraud examination and forensic accounting! Sincerely,

Thomas Buckhoff Thomas Buckhoff is an associate professor of accounting at Georgia Southern University. He is also a partner with Forensic Solutions, LLC—a forensic accounting firm specializing in fraud detection, investigation, and prevention consulting services. He may be reached at 912-478- 7142 or via e-mail at tbuckhoff@georgiasouthern.edu. Bonita Peterson Kramer is a professor of accounting at Montana State University – Bozeman, where she recently has been teaching graduate and undergraduate courses in auditing, advanced auditing, intermediate financial accounting, and fraud examination. She has auditing experience with KPMG in Texas, and the Montana Office of the Legislative Auditor. She may be reached at 406-994-4620 or via e-mail at bonitap@montana.edu.