Audit of Fraud & Fraud Detection Techniques RTI, Nagpur
Case Study 1.2 ( Based on downloaded article on Internal auditing and fraud investigation by Mark R. Simmons, CIA CFE)
John Doe held a policy/decision making position as an official of a government organization, and was also a shareholder of a service company seeking business with the organization. The service company that John Doe had shareholding in had business dealings pending before the policy/decision making body on which Mr. Doe sat. Mr. Joe had cast a deciding vote that resulted in the selection of the service company to perform work for the organization.
Issues:
· How would the above situation concerning Mr. John Doe have affected the govt organization in which he served?
· Whether the conduct of John Doe was appropriate in the entire episode.
Suggested Solution to Case Study 1. 2
· At the very least, Mr. Doe created the appearance of a conflict of interest by participating in a decision making process that awarded business to the service company. It is possible that John Doe acted in the best interest of the company, or in self-interest, rather than in the best interests of the awarding organization. It is possible that in exchange for the favourable vote, the service company could arrange special favours such as special vacations, or other bonuses from the company that would not be apparent to the govt. agency.
Alternately, there is a likelihood that that Mr. Doe could be threatened with stripping of his directorship, if he did not cast a favourable vote. Conversely, by threatening to withhold vote of approval, John Doe could coerce special benefits and rewards from the service company for himself or others. In addition, the possibility exists that because John Doe voted favourably, the govt. agency might be deprived of obtaining the best value for the money being spent, to the financial advantage of Mr. Doe and the service company.
· Mr. John’s decision to procure the contract for the company is suspect as he failed to make a disclosure to the govt. agency of his special interest in the company, because of which the decision makers in the govt. agency were deprived of an opportunity to act in the best interest of the company.
Case Study 1.2 1