This week's goal is to develop proper predication and a theory of a fraud. The facts will be scant and so you should feel free to use your imagination on how to answer the questions, but do not create new facts. You will be asked to speculate and at that point you can use your imagination, but stay within the bounds of the real world, knowing that fraudsters do try to conceal their fraud.

As with most frauds, this case starts with an anonymous tip that a certain employer is paying some, but not all, employees in cash, commonly referred to as being paid "under the table". The tip has been made to the Internal Revenue Service (IRS) and the tipster is claiming that the employer is avoiding the payment of payroll taxes by this action. You have been hired by the IRS as a forensic examiner to pursue the veracity of the claim.

The employer has a wholesale business of soft drinks, selling to various retailers. There are 25 employees working there. The employer is a well-known community leader.

QUESTIONS;

1. Your first step is to prepare notes to the file called "Predication". Why is this done? Give two reasons.

2. What type of fraud is this?

3. Speculate/research as to what you might do to develop sufficient predication that will allow you to begin actual investigatory work. Meaning what additional facts would get you to the point of believing that you have sufficiently developed adequate predication to justify starting actual investigatory procedures. HINT: You do have access to documents within the IRS that you can obtain without fear of over-stepping the bounds that predication is protecting.

4. Develop a theory on how the fraud would have been perpetrated under the circumstances.

5. How would you go about testing your theory?