Accounting Fraud at CIT Computer Leasing Group, Inc. Jeffrey E. Michelman, Victoria Gorman, and Gregory M. Trompeter

This case was developed from a real case file prepared by the office of the Florida state attorney, plus interviews with the Florida Department of Law Enforcement lead investigator and the state attorney who prosecuted the case. One of the authors was also hired by the defendant's attorney to provide forensic analysis to challenge the state's charges and the scope of the accused fraud. The expert witness' analysis was used in the defense's eventual plea bargain. All events in the case are real, as are all names, places, and time periods. The case chronicles a newly promoted manager's search to uncover an inventory fraud perpetrated by her supervisor at CIT, a publicly held company. During the subsequent investigation, CIT and the Florida Department of Law Enforcement identified 36 different transactions involving the diversion of nearly 2,500 computers, with a conservative estimated total loss to the company of $637,000. You will be exposed to the importance of internal controls, red flags, and fraud examination techniques. The case also lets you see what happens when a direct report no longer trusts a supervisor's communicated information. 1. What red flags signaled that fraud was possibly occurring at CIT? 2. Give examples of preventive and detective controls that could have prevented this fraud. 3. How did Niakan's role at CIT violate the segregation of duties control activity? 4. What techniques did Werle use to uncover the fraud? Should she have done anything differently? This case was developed from a real case file prepared by the office of the Florida state attorney, plus interviews with the Florida Department of Law Enforcement lead investigator and the state attorney who prosecuted the case. One of the authors was also hired by the defendant's attorney to provide forensic analysis to challenge the state's charges and the scope of the accused fraud. The expert witness' analysis was used in the defense's eventual plea bargain. All events in the case are real, as are all names, places, and time periods. The case chronicles a newly promoted manager's search to uncover an inventory fraud perpetrated by her supervisor at CIT, a publicly held company. During the subsequent investigation, CIT and the Florida Department of Law Enforcement identified 36 different transactions involving the diversion of nearly 2,500 computers, with a conservative estimated total loss to the company of $637,000. You will be exposed to the importance of internal controls, red flags, and fraud examination techniques. The case also lets you see what happens when a direct report no longer trusts a supervisor's communicated information. 1. What red flags signaled that fraud was possibly occurring at CIT? 2. Give examples of preventive and detective controls that could have prevented this fraud. 3. How did Niakan's role at CIT violate the segregation of duties control activity? 4. What techniques did Werle use to uncover the fraud? Should she have done anything differently