The following fact relate to an actual embezzlement ease. Someone stole more than $40,000 from a small company in less than two months. Your job is to study the following facts, try to figure out who was responsible for the theft, how it was perpetrated, and (most important) suggest ways to prevent something like this from happening again.

Facts

Location of company: a small town on the eastern shore of Maryland. Type of company: crabmeat to restaurants located in Maryland. Characters in the story (names are fictitious):

• John Smith, president and stockholder (husband of Susan).

• Susan Smith, vice president and stockholder (wife of John).

• Tommy Smith, shipping manager (son of John and Susan).

• Debbie Jones, office worker. She began working part-time for the company six months before the theft. (At that time, she was a high school senior and was allowed to work afternoons through a school internship program.) Upon graduation horn high school (several weeks before the theft was discovered), she began working full-time. Although she is not a member of the family, the Smiths have been close friends with Debbie’s parents for more than 10 years.

Required

a. If you were asked to help this company, could you conclude from the evidence presented that embezzlement took place? ‘What would you do next?

b. Who do you think was the embezzler?

c. How was the embezzlement accomplished?

d. What improvements would you recommend in internal control to prevent this from happening again? In answering this question, try to identi1’ at least one suggestion from each of the six classes of internal control activities discussed in this chapter (in the Control Activities section): transaction authorization, segregation of duties, supervision, accounting records, access control, and independent verification.

e. Would the fact that the records were maintained on a microcomputer aid in this embezzlement scheme?