Please write an introduction to the study case?

CaseChapter 5 Fraud maks) Herloom Photos sols a $900 photography plan to rural customers using a commissione Salesforce. Rather than pay the price up front, most customers pay $250 down and make 36 monthly payments of 525 each The $900 plan includes the following 1 A coupon book good for one tresting every se months for the next five years to strings) at any Heirloom approved photo studio The customer receives on the 11-14nch band-white print. Additional photos ar color upgrades can be purchased at the photographer's retalice 2. To preserve the 11-by-1-inch photos, the mily name is embossed in 24-carat gold on a weather bound photo bum The embossed leather album, with a real value of 5300 costs Hertoon 575. Each sitting and free 11-by-14. inch print with a real value of $150 costs Heirloom only 550 because photographers are given clusive nights to Heirloom customers in a geographic region and have the opportunity to offer customers up to color and or more pictures The commissioned is paid on the 10th of each month based upon the prior months. The commission rates are as follows: Salesponse Over 70% of all agents soil at least 101 plans per year 40% sell over 200 There is a long Sales before year-end as customers purchase plans to give holiday gifts About 67% of all agents reach their highest incentive bele Novembro December. Herboom treat the sales of and the photographers as independent contractors and does not withbold any income or pro son amount paid to the Salespeople send Heirloom's accounting department the order form, the total payment or the down payment and the signed note for $650 the customer finance the transaction Ofen the payment is a hand written money order. Because many customers are in rural areas the Totum address of Post Offer box and some customers do not have phones Heimom does not perfonary credit checks of customers Heirloom makes the following is the time a new De Record Sale ore Contracties Contact Enanced Cash 250 Notes receivable Sales of photo plans Te Record Experies Related to the Sale Album expense 65 Embossingsing 130 Album Inventory Account Payoti Commission Pay (Sales expenses estimated using the average cost Paid to salespersons in the prior you) To Record the ability for Photographer Sings Expense Photographer expense 500 Atbites 500 Because the entire cost of the photographer is accrued, the company points to the last by to show how conservative is accounting is After win 10 days for the check or money order to clear. Heiloom embosses and ships the album the photo coupon book and a payment coupon book with 36 payment of $25. Customers al payment couport and a check of money order to a three pron Receivables Department at headquarters. The Receivables employees open the envelopes, post the payment to the recebe records and prepare the bank deposit The photo coupon book has 10 coupons for photographer sessions, ench good for a specific mort period. If not used within the sie month period, the coupon expire Each month the credit manager sends letters and makes phone calls to collect on delinquent counts Between 35% and 40% of customers every step paying on the resulter early in the con months 40 8 or at the two-year point months 22 to 26) Notes are wionoff when they are 180 days eligent Hero's CFO and credit their judgment to adjust the Allowance for Bad Debts monthly They are confident they can accurately predict the Allowance balance needed at any time, which historically has been about 5% of outstanding receivables Agricultural product prices in the area where Heirloom sells its plans have been severely depressed for the second straight year. Heirloom has been growing quickly and finds that is continually running short of cash, partly because of the large salaries paid to the two equal owners and their wives. (The wives each receive $100,000 to serve as the treasurer and the secretary, very little, if any. time is required in these duties) in addition, Heirloom spent large amounts of cash to buy headquarters equipment and furnishings, and expensive automobiles for the two owners, their wives, and the four vice presidents Figure 2: Internal and external Relationships at Heirloom Photo Heirloom needs to borrow from a local bank for Corporate short-term operating purposes. It is willing to pledge unpaid contracts as collateral for a loan. A local bank president is willing to lend Heirloom up to 70% of the value of notes receivable that are not more than 60 days overdue. Heirloom must also provide by the fifth day of each month, a note receivable aging list for the Figure 2 Internal and external Relationships at Heirloom Photos preceding month and a calculation showing the maximum amount Heirloom may borrow under the agreement. Requirements: From the above case, you are required to discuss with your group members and provide a complete report. Your report should include all points below 1. Figure 2 above shows the employees and extemal parties that deal with Heirloom Explain how Heirloom could defraud the bank and how each internal and extemal party, except the bank, could defraud Heirloom 2 What risk factor unusual item, or abnormality would alert you to eachfraud? 3. What control weaknesses make eachfraud possible? 4. Recommend one or more controls to prevent or defect each means of committingfraud. IMPORTANT When writing your report, you need to CLEARLY indicate the question number for each of your answers. Your marks will be determined mainly by the CLARITY AND NEATNESS OF YOUR ANSWERS. Your answers for Os 1 to 4) can be in the form of points, or tables but NOT paragraph (except the introduction and conclusion CaseChapter 5 Fraud maks) Herloom Photos sols a $900 photography plan to rural customers using a commissione Salesforce. Rather than pay the price up front, most customers pay $250 down and make 36 monthly payments of 525 each The $900 plan includes the following 1 A coupon book good for one tresting every se months for the next five years to strings) at any Heirloom approved photo studio The customer receives on the 11-14nch band-white print. Additional photos ar color upgrades can be purchased at the photographer's retalice 2. To preserve the 11-by-1-inch photos, the mily name is embossed in 24-carat gold on a weather bound photo bum The embossed leather album, with a real value of 5300 costs Hertoon 575. Each sitting and free 11-by-14. inch print with a real value of $150 costs Heirloom only 550 because photographers are given clusive nights to Heirloom customers in a geographic region and have the opportunity to offer customers up to color and or more pictures The commissioned is paid on the 10th of each month based upon the prior months. The commission rates are as follows: Salesponse Over 70% of all agents soil at least 101 plans per year 40% sell over 200 There is a long Sales before year-end as customers purchase plans to give holiday gifts About 67% of all agents reach their highest incentive bele Novembro December. Herboom treat the sales of and the photographers as independent contractors and does not withbold any income or pro son amount paid to the Salespeople send Heirloom's accounting department the order form, the total payment or the down payment and the signed note for $650 the customer finance the transaction Ofen the payment is a hand written money order. Because many customers are in rural areas the Totum address of Post Offer box and some customers do not have phones Heimom does not perfonary credit checks of customers Heirloom makes the following is the time a new De Record Sale ore Contracties Contact Enanced Cash 250 Notes receivable Sales of photo plans Te Record Experies Related to the Sale Album expense 65 Embossingsing 130 Album Inventory Account Payoti Commission Pay (Sales expenses estimated using the average cost Paid to salespersons in the prior you) To Record the ability for Photographer Sings Expense Photographer expense 500 Atbites 500 Because the entire cost of the photographer is accrued, the company points to the last by to show how conservative is accounting is After win 10 days for the check or money order to clear. Heiloom embosses and ships the album the photo coupon book and a payment coupon book with 36 payment of $25. Customers al payment couport and a check of money order to a three pron Receivables Department at headquarters. The Receivables employees open the envelopes, post the payment to the recebe records and prepare the bank deposit The photo coupon book has 10 coupons for photographer sessions, ench good for a specific mort period. If not used within the sie month period, the coupon expire Each month the credit manager sends letters and makes phone calls to collect on delinquent counts Between 35% and 40% of customers every step paying on the resulter early in the con months 40 8 or at the two-year point months 22 to 26) Notes are wionoff when they are 180 days eligent Hero's CFO and credit their judgment to adjust the Allowance for Bad Debts monthly They are confident they can accurately predict the Allowance balance needed at any time, which historically has been about 5% of outstanding receivables Agricultural product prices in the area where Heirloom sells its plans have been severely depressed for the second straight year. Heirloom has been growing quickly and finds that is continually running short of cash, partly because of the large salaries paid to the two equal owners and their wives. (The wives each receive $100,000 to serve as the treasurer and the secretary, very little, if any. time is required in these duties) in addition, Heirloom spent large amounts of cash to buy headquarters equipment and furnishings, and expensive automobiles for the two owners, their wives, and the four vice presidents Figure 2: Internal and external Relationships at Heirloom Photo Heirloom needs to borrow from a local bank for Corporate short-term operating purposes. It is willing to pledge unpaid contracts as collateral for a loan. A local bank president is willing to lend Heirloom up to 70% of the value of notes receivable that are not more than 60 days overdue. Heirloom must also provide by the fifth day of each month, a note receivable aging list for the Figure 2 Internal and external Relationships at Heirloom Photos preceding month and a calculation showing the maximum amount Heirloom may borrow under the agreement. Requirements: From the above case, you are required to discuss with your group members and provide a complete report. Your report should include all points below 1. Figure 2 above shows the employees and extemal parties that deal with Heirloom Explain how Heirloom could defraud the bank and how each internal and extemal party, except the bank, could defraud Heirloom 2 What risk factor unusual item, or abnormality would alert you to eachfraud? 3. What control weaknesses make eachfraud possible? 4. Recommend one or more controls to prevent or defect each means of committingfraud. IMPORTANT When writing your report, you need to CLEARLY indicate the question number for each of your answers. Your marks will be determined mainly by the CLARITY AND NEATNESS OF YOUR ANSWERS. Your answers for Os 1 to 4) can be in the form of points, or tables but NOT paragraph (except the introduction and conclusion