1. You juststarted your own roofing business, and you have
1. You juststarted your own roofing business, and you have hired 10 new employees. Two ofthe new employees are responsible for taking care of all of the administrativefunctions of the company. Because this is a very competitive business, thesepersons will also be responsible for bidding on new business. The other eightemployees are divided into two different work groups of four that will go todifferent job sites and replace old roofing material with new material. You areaware that fraud prevention is necessary because fraud is likely to occur inany company. Because you have never operated your own business before, you areunsure ofwhere to begin in order to protect your assets from being stolen. You decide tosearch the Internet in order to discover the types of opportunities that existfor employees to steal assets.Identify and discuss the different types of opportunities that exist foremployees to steal assets from your company. What can you do to eliminate thesefraud risks?2. Answer the following questions regarding theSarbanes-Oxley Act of 2002 (‘Act’).1. Do you feel that the Act was too little, too late, is adequate to accomplishits intended goals, or otherwise?2. Why or why not should the Act be expanded to include all companies, whetherlarge or small, publicly or privately held? Be sure to adequately defend yourpositions.3. Jonas Fritz, ownerof Careful Construction Inc., had a perplexing problem. Although his companyalways had enough work to keep the employees busy, company profits were falling.In fact, Careful Construction Inc. will have difficulty meeting its payrollthis year. Mr. Fritz compared Careful Construction Inc.’s materials costs withthe company’s overall revenues for the past 3 years, and he noticed thatmaterials costs were rising at a significantly greater pace than were revenues.Mr. Fritz could not understand why materials costs were rising so rapidly,especially since his other costs were remaining relatively constant. Mr. Fritzshowed these results to his friend, Larry ‘Calculator’ Mason, who hadconveniently just taken a continuing education course in fraud recognition andprosecution.Mr. Masonpeered out from under his green eyeshade and said, ‘Well, Jonas, you mighthave a fraud here! Maybe one of your employees is stealing from you!’Mr. Fritzinterrupted, ‘But how would employees get their hands on that much cash?I’m not a bank; I don’t have much cash in the office—and my three officeemployees have worked here for years. We’re like family!’Mr. Masonreplied, ‘I’ll explain—the employee, if it is an employee, probably is notwalking out of here with $20 bills. Let’s look at your purchasing invoices andemployee records and see what we can find. But first, read this paragraph onemployee cash theft. I got this booklet at the last seminar I attended, andthis paragraph will help you understand what we will be looking for.’1. Using what you know about how employees steal company cash, respond to thefollowing. A. Who is likely committing fraud at Careful Construction? B. Name two possible ways that this individual could commit fraud. 2. Name three steps Mr. Fritz should take in order to verify his suspicions aboutwho is committing fraud. 3. What are at least two controls Mr. Fritz could institute to prevent this typeof fraud from happening again?