P5

Due date : 10/12

Memo Style. APA no plagiarism. 3 Scholarly sources. 2 pages.

Vendor schemes can be subcategorized as either fictitious vendor or pass-through

schemes. With fictitious vendor schemes the victim company receives nothing from the

fictitious vendor except the bogus invoices. Thus, the fraud loss is determined by adding

up the total payments made to the vendor. A pass-through scheme is one in which the

fraudster sets up a shell company as an unnecessary intermediary between a legitimate

vendor and the victim company and makes an unauthorized profit on the transaction.

Accordingly, with a pass-through scheme the victim company is actually receiving

something in exchange for payments made to the shell company. Thus, the fraud loss is

the amount of the unauthorized profit made by the fraudster. With pass-through schemes

the victim company receives invoices from the shell company instead of from the vendor

that is actually providing the products or services listed on the invoices. Based on your

understanding of how the two schemes work, develop a strategy for determining whether

the fraudster is perpetrating a fictitious vendor scheme or a pass-through scheme. Using

the most suspicious vendor’s taxpayer id number as the password, carefully examine the

“Bank Statement” file which contains the bank statement and copies of the cancelled

checks. Determine whether the suspicious vendor you have identified is a fictitious

vendor scheme or a pass-through scheme. Explain and defend your answer in Memo

format and submit it to your instructor for grading