1. Something’s Fishy at Sy’s Fish
Margaret Garnsey
Siena College
2010 AIS Educator Conference
Estes Park

2. Overview Background Purpose of the case Classroom Discussion
Query Hints
Business Letter

3. Background
Sy’s Fish was originally developed as a modeling case using the REA ontology
Implementation and querying component was added to give students “hands on” experience
Coverage of internal controls has been expanded in many AIS courses

4. Purpose of the Case
Develop critical thinking skills by working on an unstructured problem
Further develop querying skills
Practice communication skills

5. Classroom Discussion What is fraud? Fraud Triangle Fraud Categories
Fraud Opportunities

6. Fraud Definition
“The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets”
The Association of Certified Fraud Examiners (ACFE) Report to the Nation on Occupational Fraud Abuse, 1999

7. The Problem
Organizations lose 5-6% of revenue annually due to internal fraud = $652 Billion in U.S. (2006)
Average scheme lasts 18 months, costs $159,000
25% of costs exceed $1M
Smaller companies suffer greater average $ losses than large companies

8. How Fraud is Discovered
Some fraud is discovered via multiple reporting methods
Tips come from Employee 64%, Anonymous 18%, Customer 11%, Vendor 7%

9. Is Sy’s Fish ripe for fraud?
Fraud Triangle
Opportunity
Is Sy’s Fish ripe for fraud?
Opportunity
The first point on the triangle is Opportunity. Management has primary control over this element – they sometimes facilitate fraud by maintaining an environment with weak internal controls.
Decreasing the opportunity for fraudulent activity is crucial for prevention. In one Emory department, the department administrator performed all the duties from hiring and firing of personnel to P-Card transaction review and approval, budget preparation and review, expense approvals, and etc.; this department administrator performed multiple fraudulent transactions ranging from accounts payable to payroll to P-Card to human resources because the opportunity was available.
Management should ensure that, although tasks can be delegated, accountability for your area or unit cannot be delegated. Management must provide oversight and monitoring.
At Emory, an Administrative Assistant who had access to add/delete employees from payroll reformatted the labor distribution reports and provided them to the human resources manager. Unbeknownst to the manager was that the employee was omitting the ghost employees documented on the labor reports. The review of system generated reports would have identified the ghost employees.
Not all employees will exploit opportunity. Typically, these individuals also experience “Pressure” or “Incentive” to do so. This brings me to the second point on the fraud triangle.
Pressure/Incentive
Typically, pressure stems from lifestyle habits, personal debts, and other non-sharable problems. These non-sharable problems may be problems the individual experiences him or herself OR extends out to close family members and friends.
In an attempt to lessen the problem, the fraudster is pressured to carry his/her plan out.
Rationalization
Once the individual has opportunity and personal pressure, the fraud is executed with a rationalization:
“I deserve to get paid more. The company makes so much money.”
“I am only borrowing it for now. I’ll pay it back when I can.”
****The ability to rationalize is influenced by the “tone at the top” and perceptions the employee has regarding management’s commitment to the “rules.” ****
Motivation/Pressure
Rationalization

10. Common Types of Fraud in a Company
Employee theft – involves diversion of assets by an employee for personal gain.
Employee-outsider theft – involves diversion of assets by an employee in collusion with an outsider for personal gain.
Management fraud – concerns diversion of assets or misrepresentation of assets by management.

11. Possible Fraud at Sy’s Fish
What types of fraud could be committed at Sy’s Fish?
For each type of fraud, what methods may help to prevent such fraud?

12. Hints to Students Initial Hints Later Hints
Cash received/paid to customers/suppliers accurately represents amounts billed
Parse Data by Month: Month(NameOfField)
Later Hints
Look at Gross Profit and its components
Examine Employees

13. Files and Contact Information
Paper
Student Database File