Week 3 Case Study: Plutonium Company Fraud Kyle Harrison Keller Graduate School of Management AC 572: Accounting Fraud Examination Concepts Instructor Sherwin Cord January 25, 2009
Week 3 Case Study: Plutonium Company Fraud Plutonium, an Internet start-up company founded in 1988, was in the midst of a massive project to improve integration and internal data quality of its disparate information systems. At the heart of this project was an endeavor to implement a complex billing system called Gateway. Gateway, working with Visa, would automate billing for Plutonium’s large customer base; however, once implemented, Gateway had thousands of corrupt accounts that needed to be resolved in order to improve Chris’s suddenly secretive behavior clearly signals fraud. Other symptoms also signaled fraud. Jonathan noticed that Chris was using multiple usernames and passwords for testing. This signaled that Chris was probably overriding the existing control of only one username and password combination per employee. Jonathan also noticed that Chris had recently acquired several high-dollar electronic gadgets such as a Palm Pilot, an MP3 player, a PlayStation, and a new laptop. Chris was even treating himself out to lunch more often. These lifestyle changes were clear signals that Chris was up to something. Unfortunately for Jonathan and Plutonium, several steps could have been taken to eliminate opportunities for Chris, or anyone else for that matter, to commit and conceal fraud. Albrecht, Albrecht, & Albrecht (2006) state that, “if one of the three elements is missing, fraud is unlikely” (p. 99). Perceived pressures and rationalizations are difficult to predict and plan for, so Jonathan should have focused his efforts on eliminating fraud opportunities. Specifically, Jonathan could have created an effective control environment, good control procedures, and a whistle-blowing system to eliminate opportunities to commit and conceal fraud. An effective control environment is the first step toward eliminating fraud opportunities. Plutonium needed to have a stronger tone at the top, one that it labeled often, modeled daily,
