to conduct a forensic investigation of the Tallahassee BeanCounters (TBC), a minor league baseball team in Tallahassee, Florida. TBC has never before been au- dited.

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Your firm has been hired  to conduct a forensic investigation  of the Tallahassee BeanCounters (TBC), a minor  league baseball  team in Tallahassee, Florida. TBC has never before been au- dited. Franklin Kennedy, the team’s owner, has told employees  that the audit is a requirement of the bank, which provided  the mortgage  loan for the recently completed  tmining  faCility.

However,  Mr. Kennedy  privately  tells your audit  team that he received an anonymous  note (below) in the mail leading him to suspect that someone  within  the company is conullitting fraud. The envelope,  addressed  to Mr. Kennedy, had a Tallahassee postmark  and no return address.  Because Mr. Kennedy  lives in Boston, he has entrusted  the running  of this fl’anchise to his long-time  associate Phil Ackers, Mr, Kennedy  had assumed  that things were running efficiently  until the note arrived.  TBC has no formal procedures   to accommodate  whistle- blowers  and the employees  of TBe are unaware  of the true nature  of your engagement.

Mr. Kennedy:

I think there is something  funny going on here at TBe. Numbers  that do not add up,lots of whispers  in the hallways  and dosed-door   discussions  have me suspicious.  ITI were you I would  check it out.

A long-time  friend.

The owner has asked you to focus your investigation  on the last five months  (May through September).  This is the time period  during  which  the training  facility was constructed. As you familiarize  yourself with the company, you note that in addition  to revenue  from ticket sales, TEC generates  funds  from parking,  fundraislng,   and sales of concessions  and game programs.  Franklin  Kennedy  also gives TBe some start-up  money at the beginning  of the season  to assist with  expenses until  the team starts  earning  revenue  from games, He with- draws  that  money  over  the course  of the season.  Operating  expenses  consist primarily  of payroll,  equipment  (bats, balls, etc.), team travel, programs,  and concession inventory; Any fees due to the baseball league,  such as franchise  fees, are paid by the Boston Sox (Franklin Kennedy’s  major league team) on behalf of TBe. Payroll  is processed  by an outside service company. Other office expenses are similar to those of most small businesses.

Student  Handout   (SH)l provides  an organizational   chart for TBe. Office manager  Den Hill oversees  daily  operations  of the organization.   Michelle Shelton  provides  support  for management  and handles most of the bookkeeping. including  accounts payable, cash receipts, and equipment  purchase  orders, Candace (Candie) Larson, receptionist,  answers phones and compiles time sheets for processing. Julie Roper, assistant to the president,  assists with donor relations  and is also responsible  for concessions  ordering  and inventory  as well as accounts receivable  collections. President  Phil Ackers oversees  fundraising  activities and supervised the building  of TBe’s newly  completed  training  facility.

To familiarize  yourself  with TBC, you attend  a night  game and chat with  some of the

employees.  The three women  who work in the ticket booth  seem particularly  eager to chat. Myrna Myers, their supervisor,  tells you the three women have worked  together in the booth for 20 yem’s. Their husbands  come to every game, and the six often socialize together as well. Myrna is happy  to talk to you about the other TBe employees,  especially those in the front office, Below is a summary  of Myrna’s  opinions.













Forensic Accounting  in Action                                                                                                      18-13



Company  Overview: Things have changed  a lot this last year. Mr. Ackers cut down  on excess employees,  particularly  some of the game-day  employees because  it’s expensive  to build a new training  facility. I don’t  mind because this new building  is great It’s state-of-the-art  and I hope it will help us recruit and keep our players  in shape. We’ve had  a great season this year, and all of the ladies here would  love to see that continue; A lot of people  complained during the building  because of the mess and there was some tension because Mr. Ackers was on us to be efficient and cut expenses  so we could qualify for

. a good rate on the mortgage  loan, but we qualified  and I think it was worth

  1. Phil brought in food and drinks for all of us the day we got the loan and everything  was set. It was a lot of fun,


Phil Ackers  Company President;  Phil’s a nice guy; he oversees the fundraising, and seems to know everyone everywhere.  That’s probably  because he was a professional  ballplayer  years ago. He was pretty  tense during  the building  of the new training facility, but now that it’s completed,  he’s getting back to his old self. He’s  really close to his family; in fact  he even hired  his niece Julie Roper to take the place of Terri Hughes  who had  been his assistant  forever when  she left to go take care of her mother.



Julie Roper Assistant to the President:  She’s a great change from Terri Hughes, Mr. Acker’s  former assistant.  Terri guarded  Mr. Ackers’ office to the pointit was impossible  to get hold  of Mr. Ackers to ask even the Simplest question. Anyway,  Terri’s  mother  got sick and  Terri left, then  Mr. Ackers  hired  his niece, Julie. Like I said! she’s  a welcome change. She works very hard, even has  taken  over some jobs that Terri wouldn’t   touch,  like the  ordering  for concessions  and group  ticket sales. She also took over  accounts  receivable collections from Michelle, who was thrilled  to get rid of that job.


Tucker Johnson   General Manager:  TIle players love ‘Iucker, He has an interest- ing coaching philosophy-never      raises his voice to ‘the players  or uses foul language.  We!ve sent many players  up to the majors, so he still gets the job done even without  the four-letter words. Tucker can’t stand paperwork,  so he has Sam do most of the ordering  as well as taking  care of all the equipment.


Ben Hill Office Manager:  Ben still thinks it’s 1979 and disco is king. He dresses like John Travolta in Saturday Night Pever and is always hitting on the women in the office, He has several ex-wives; most of whom he started  dating  while still married  to a previous  one. When TBC qualified  for its bank loan,  Ben got a nice bonus which he blew on a new Cal’.  He calls it his “chick magnet. II He keeps things running  smoothly inthe office though,  so Mr. Ackers pretty much lets him run dey-to-day  operations  however  he wants.


Candace LArson  Receptionist:   Candie is a sweet young  girl. She’s good with the phones,  and everyone  likes her. She’s  the reigning  Queen  of the Taylor County  Crab Festival. We were all real proud  when  she won. She’s always at the practice  field after work-sometimes     I think she’s more interested  in dating  players  than in doing her job, but  overall she’s a good worker.


Michelle Shelton  AlP Clerk:  Michelle is really hard working.  She handles  all the bookkeeping  and paperwork,   like the purchase  orders  and  stuff. She’s also going to school part  time.

Forensic    AND  INVESTlGAiM’:   ACCOU/llTlNG

To begin  your  audit,  your  team  does  a walk-through     of each process  at TBC. SH 2 describes your   observations     of those  processes    and  how  employees    handle    their  responsibilities.     You also  collect  a copy  of  the  team  game   schedule    (SH  3) and  copies   of the  last  five  months   of financial   information     (SH 4 through   SH  17).


Your instructor    will  divide   the  class  into  teams.   Working   with   your  team,  your  assignment is to determine    whether    fraud   has  been  committed    at TBC, and,  if so, to gather   and pres. ent  evidence   sufficient   to prove  the  guilt  of the  suspect(s).    This  is a competitive    exercise.

It is essential   that  you  keep  the information     that  yOUl’ team  has  gathered    private.   Leaks

provide   other  teams  with   cheap  information,     and  willput    your  team   at a disadvantage     at the  time  of grading,

The  first step  is to review  the background    and  financial   information    provided.  Then,  working with  your  team,  brainstorm.”    Given  the  company,   its employees,    and  processes,   how  could

a fraud   be committed     and  concealed?    Remember    the  “fraud    triangle:”    to commit   fraud,  a perpetrator     must   have  pressure,    opportunity,     and  a rationalization      for  his or her  behavior (AICPA,  para.   33). Are  there  weaknesses     in controls   that  could   be  exploited    by  an  unscru- pulous   employee?    Which  employees    have  the incentive   to do so? Review   the given  financial data.  Do relationships    between   financial   and  non-financialfnformation        seem  reasonable?   Are there  any  unusual    trends,   postings,    or transactions     about   which   your  group   is curious?

As  in  a real  audit   or  forensic   investigation,     your   group   is not  provided,    initially,   with all the  information     needed    to solve  the  case.  Once  your   group   has reviewed    the  materials provided    and   completed    your  brainstorming      session   covering    the  questions    listed   above, compile   a list  of additional    information    you  would   like  to receive,   You will  request   this in- formation    via your  Instructor,   To obtain   the additional    information     you  need,  send  an email

the  phone   invoices   for May.” .  
As  this is a forensic   investigative exercise,   you  have  greater   latitude than  in most  audit


to your  instructor,   but  address   your  request   to the  appropriate     employee    of TBC,  or the ap- propriate    outside    party.   POL’  example,    “Michelle    Shelton:   Please   provide    us  with   copies  of



situations    to gather   information    in any  legal  manner   you  see fit. For example,   you  can ques- tion  TBC  employees,     their  friends,   relatives,    and  business    associates.    If you  have   enough evidence    to give  probable    cause,  you  can  obtain   a subpoena    from  a judge   enabling    YOlt  to acquire  private   information    (such  as credit  reports   or bank   accounts).   If requesting    evidence from  outside   of TBC, be clear  inyour  request,  For example,   “If I examine   public  records,  what will  Ilearn   about   cars owned   by  Sam  McCarty?”    or  “If Iattend    the TBe  fundraislng  event on April  3, what  will Isee?”   You can also conduct   other  information    gathering    exercises-for

example,   surveillance    of TBC employees. Interviewing      Suspects

If time  allows,   your  instructor    may  provide    your   team   an opportunity     to interrogate    your suspectfs)    near  the end  of your  work  on the  case,  The  goal  of the  interrogation     is to obtain  a confession    from  your   suspect(s).   You can  include   any  confessions    you  obtain   as additional

Forensic Accounting  in Action

evidence  in ,your final fraud  report.  You will question  any suspects  as a team, so think  of

ways you can use your team effectively. The interviews  are generally short (10 to 20 minutes), so consider  the following:

  1. Be prepared.  The more information you have gathered toward  solving the case, the higher the likelihood  you can induce  an admission  of guilt from your suspect.  For example, if you know who did it, how they did it, why they did it, and can show that they benefited from the crime, you can box your suspect(s) into a corner and obtain  a confession.
  2. Have  a plan.  Organize  your  information  and decide  on a method  of presentation   that will best demonstrate   to the perpetrator   that  denial  of guilt is futile. However,  do not treat your pre-planned   questions  as a script to which  you must  adhere. You wi1l want to modify  your  approach  as the interview  progresses  based  upo~  the responses  of the suspect.
  3. Have a theme for your interview. How will you behave  toward  the suspect? Will you be

empathetic  and understanding,   allowing the suspect  to rationalize  his or her behavior? Or will you act as if resistance  to questioning  is fruitless, as you have all the information you need  and are just letting  the suspect state his or her side? Will you team up to play “good-cop,  bad-cop”?  Make certain that all members  of your  team are using  the same line of reasoning.

Final Fraud  Report

Your team will be graded  based upon your written  final fraud report,  Your report should be convincing  and include  the following  for each fraud  your group  uncovers:

  1. The name(s)  of the perpetrator(s)  of the crime. S.   How  the perpetrator(s)   committed  the fraud.
  2. The dollar magnitude  of the fraud.
  3. The personal  gain received by the perpetrator(s)   from the fraud.

In your  report,  you  should  include  evidence  to back up  your  assertions  in the four areas above. ‘This evidence  might  include  documentation   you have  gathered  from your  emails, informatlon summarized  from intervlews and other sources such as surveillance, and analysis

‘based on data from the student  handouts.  Finally, experience  has shown  that the most suc-

cessful teams  are those that work together. Each team member’s   point of view is valuable. Divide this case and work alone, at your own peril.

Documents    for  Analysis

Figures  18.1 through  18.28 provide  the immediate  information   that  is available  for you to begin your investigation  of fraud at the BeanCounters.  These include  an organizational  chart and an analysis based on.interviews with the various employees regarding  their backgrounds and job functions and how they conduct the company’s  business  on a regular  basis. There is a copy of the game schedule and financial files (registers, ledgers, inventory- invoices, payroll records,  revenue  and expense accounting)  for the period  April through  July where you are told to expect that  fraudulent  activity is most likely to have  occurred.

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