Terry is an accountant at Hoffman Corporation. Her main function is to prepare production-cost reports for distribution to upper management. Her good friend Tracy is the production supervisor on one of the production lines. While preparing this month’s cost report, Terry noticed a substantial increase in production costs on Tracy’s production line, which made her think there must be an accounting error somewhere. To make her friend look better, Terry shifted some of the costs to other lines. The shift in costs was never noticed.

Required
A. Did Terry act appropriately?
B. How should the company respond to Terry’s behavior?
C. Did Terry commits fraud? What must be true for you to conclude that she committed fraud?
D. Discuss the alternative courses of action that Terry could have taken.