O

ver the last few

years, attention
has been
focused on large cor-
porate frauds resulting
from cash manage-
ment systems devoid
of adequate controls
and governance func-
tions. Fraud is a prob-
lem to some degree in
all organizations
whether large or small,
profit or nonprofit,
public or private. The
Association of Certi-
fied Fraud Examiners
(ACFE) estimates
annual business fraud
loss to exceed $650
billion.
1
Approximately
half of all frauds occur in small
businesses, and the impact is
often devastating. The ACFE
2006 Occupational Fraud Survey
found the average loss in small
companies per fraud scheme was
$190,000, greater than the aver-
age loss in any other business-
size category.
2
Most experts agree that
fraud generally starts small,
even in large corporations. For
this reason, all organizations
can benefit from sharpening
their fraud detection and pre-
vention practices regarding
their cash management sys-
tems. Since most instances of
fraud start small, this article
examines five cases of fraud of
smaller proportion that could
lead to large cash losses and
offers advice for management,
board members, and auditors
for detecting and preventing
such fraud practices in the
future.
COMPONENTS OF
FRAUD
In order to under-
stand why people
commit fraud, it is
useful to examine the
three components of
fraud: incentive (pres-
sure), opportunity, and
rationalization.
3
It is
generally felt that all
three components are
necessary to perpe-
trate fraud but may
vary in magnitude
depending on the
organization, environ-
ment, and perpetrator.
The first compo-
nent of fraud is incen-
tive or pressure to commit a
fraud. Pressures may be finan-
cial, such as ones mortgage
payments, medical bills, and
education costs, or nonfinancial,
such as the need to conceal
ones mistakes or errors, job
dissatisfaction, or pressure from
others. In todays economy, pres-
sure may represent the most
pervasive component of fraud.
While its hard to predict the
level within the organization
Over the past few years, the spotlight has been on
large corporate frauds. These resulted from cash
management systems devoid of adequate controls
and governance.
But about half of all frauds occur in small
businessesand the effect is often devastating.
The average loss for any small business fraud
scheme was found to be greater than in any other
business-size category.
Since fraud generally starts smalleven in
large companieseveryone can benefit from
sharpening their cash management fraud preven-
tion. This article examines five cases of smaller
frauds that could lead to large cash losses. And
the authors give advice on how to better detect
and prevent such frauds in the future.
2008 Wiley Periodicals, Inc.
f e
a
t
u
r
e
a
r
t
i
c
l
e
37
2008 Wiley Periodicals, Inc.
Published online in Wiley InterScience (www.interscience.wiley.com).
DOI 10.1002/jcaf.20449
Prevent Large Cash Losses from Small
Business Fraud
Leigh Redd Johnson and Holly R. Rudolph
JCAF20-1_20449.qxp 10/16/08 9:46 PM Page 37
this component impacts the
most, the ACFE 2006 Survey
reveals that 41.2 percent of
frauds are committed by
employees, 39.5 percent by
managers, and only 19.3 percent
by owners/executives,
4
suggest-
ing that employees and man-
agers might be more responsive
to this component of fraud than
executives and owners.
The second component of
fraud is opportunity to commit
fraud. Organizations have more
control over this component of
fraud than the other two compo-
nents. Opportunities to commit
fraud range from an insufficient
internal control structure to lax
business practices. Both lower-
level employees and top manage-
ment may find opportunity to
commit fraud, but not all
take advantage of these
circumstances. The ACFE
2006 Survey found that
owners/executives
accounted for less than
20 percent of the number
of frauds, but their median
loss in a fraud scheme was
$1 million, while employees
and managers accounted for over
80 percent of the number of
frauds, but their median loss in
a fraud scheme ranged from
$78,000 (employees) to $218,000
(managers).
5
These statistics
suggest that while opportunity to
commit fraud exists at all organi-
zational levels, the greatest
impact is at the owner/executive
level, where management often
has the ability to override inter-
nal controls.
The third component of
fraud is rationalization, or the
ability of individuals who com-
mit fraud to justify their actions.
As pressure and opportunity to
commit fraud increase, rationali-
zation may become easier.
Rationalization is generally
present in initial frauds but may
dissipate as other frauds are
committed. Employees may
have little difficulty in rational-
izing their actions to commit
fraud in todays economy. While
some fraudsters justify their
actions based on personal or
family needs, others justify their
actions based on perceived orga-
nizational misdoing. Similar to
the first component of fraud,
organizations often do not have
control over this component of
the fraud process, but maintain-
ing open communication lines
might help thwart the impact of
this component.
Since opportunity is the
component of fraud that organi-
zations have the most control
over, the following five cases
are presented to show how this
component of fraud can impact
small as well as large organiza-
tions. Exhibit 1 includes a sum-
mary of each case with sug-
gested fraud detection and
prevention strategies.
OPPORTUNITY NUMBER 1:
DIVERTING CORPORATE FUNDS
Auburn Professor Case Study
By the time that Loyd
Lawing Jr., a former Auburn
professor, pled guilty to embez-
zlement earlier this year, he had
taken over $900,000 from the
local chapter of Alpha Tau
Omega, a social fraternity.
6
The
professor was able to divert fra-
ternity funds from local banks to
his personal and corporate
accounts for approximately three
years before his actions were
detected because he served mul-
tiple key roles for the fraternity:
chapter advisor, secretary, and
treasurer. Consequently, Lawing
had unlimited and unrestricted
access to the significant amount
of cash in the fraternitys bank
accounts, which was derived
from the sale of the fraternitys
building and various donations
to the organization.
The diverted funds were
used to purchase a luxury vehi-
cle, as a substantial down pay-
ment for a new house, and to
support a struggling corpora-
tion where Lawing served as
president and chief operating
officer. When fraternity board
members questioned Lawing
about the status of the fra-
ternitys cash accounts,
Lawing assured board
members that the funds
were being invested in
several vehicles, including
CDs, money market
accounts, and fraternity
trusts.
Preventing the Fraud
Separating the duties of
those who are authorized to
access cash accounts and those
in charge of recordkeeping can
help an organization avoid a loss
of cash assets like the fraternity
experienced. Furthermore,
requiring an independent review
of corporate accounts by some-
one who is removed from the
day-to-day cash transactions can
reveal systemic abuses by com-
pany insiders. As noted above,
Lawing was able to divert funds
for his personal use due to the
lack of internal controls. As
chapter advisor, secretary, and
treasurer, he had the ability to
authorize the distribution of the
fraternitys cash, as well as
38 The Journal of Corporate Accounting & Finance / November/December 2008
DOI 10.1002/jcaf 2008 Wiley Periodicals, Inc.
Both lower-level employees and top
management may find opportunity to
commit fraud, but not all take
advantage of these circumstances.
JCAF20-1_20449.qxp 10/16/08 9:46 PM Page 38
oversight of the fraternitys cor-
porate records. If the fraternity
had separated the functions of
advisor, secretary, and treasurer,
it is less likely that Lawing
would have been able to divert
the funds. Additionally, a ran-
dom external review of the fra-
ternitys accounts by an inde-
pendent party could have
detected the fraud and possibly
prevented it from advancing as
far as it did.
A sound corporate gover-
nance structure also is a key
component of eliminating cer-
tain opportunities for cash
fraud. While it is illogical for
board members to reconcile all
records related to cash, it is
imperative for corporate (or, in
this case, nonprofit) board
members to require some inde-
pendent verification of major
The Journal of Corporate Accounting & Finance / November/December 2008 39
2008 Wiley Periodicals, Inc. DOI 10.1002/jcaf
Summary of Cases and Suggested Detection and Prevention Strategies
Auburn Professor Case Study Separate duties of those authorized to access cash
and those in charge of recordkeeping.
Require an independent review of corporate
accounts.
Implement a sound corporate governance structure
with appropriate oversight of major transactions.
Periodically review documentation related to invest-
ments.
Funeral Home Case Study Review suspicious activities that involve multiple
accounts in a short time period.
Require two signatures on checks over a certain
amount.
Confirm closed accounts with customers.
Conduct fraud detection training.
Fast-Food Case Studies Require management and/or technological oversight
of employees who handle cash.
Review sales records for irregularities.
Institute mechanisms whereby employees, cus-
tomers, and/or suppliers can report employee fraud.
Centrally locate cash registers.
Longshoreman Case Study Periodically distribute payroll checks/stubs to verify
legitimate employees.
Reconcile payroll records with employee payments.
Review corporate policies or external factors that may
encourage employees to commit payroll fraud.
Conduct surprise audits of payroll accounts.
Financial Institution Case Study Review expense reports/reimbursement requests for
employees when such reports/requests are dispro-
portionate to similarly situated employees.
Hire an external auditor to review expense accounts.
Utilize tip lines to report expense account fraud.
Require appropriate documentation for reimburse-
ment of business expenses.
Exhibit 1
JCAF20-1_20449.qxp 10/16/08 9:46 PM Page 39
transactions, especially when
there may be a lack of separa-
tion of duties at the manage-
ment level. Although fraternity
board members did question
Lawing regarding the status of
the cash assets, they did not
require independent verification
of Lawings statements regard-
ing the investments of the fra-
ternitys cash. A simple request
by board members for docu-
mentation relating to the invest-
ments may have prevented the
cash fraud.
OPPORTUNITY NUMBER 2:
FALSIFYING ACCOUNT
RECORDS
Funeral Home Case Study
When Paul Stella was
sentenced to more than
four years in prison in
February of this year, he
had spent over $925,000
of client funds for per-
sonal gain.
7
The former
funeral director used two
schemes to facilitate a
lavish lifestyle of gambling
and extravagant vehicles, home
improvements, and vacations.
In the first cash-fraud scheme,
Stella entered into contracts
with individuals whereby he
agreed to safeguard prepaid
funeral expenses by holding
advance funds in trusts.
Instead, he used the funds for
personal gain. In the second
cash-fraud scheme, Stella
raided bank accounts estab-
lished by the former funeral
home director that held prepaid
funeral expenses. Specifically,
he falsified customer letters to
the bank where the customer
accounts were held requesting
that the institution close the
accounts. The bank then issued
checks to the clients, which
Stella fraudulently endorsed
and placed into his personal
bank accounts.
Preventing the Fraud
While separation of duties
and an independent review of
corporate accounts may have
prevented the fraudulent
scheme in the Auburn professor
case, these steps are unlikely to
be implemented in a situation
similar to this one where the
perpetrator also is the owner/
manager/director. However, the
banks that accepted the phony
letters and the forged checks
also played a role in the fraud.
Thus, the clients were not the
only victims in this crime; by
accepting phony letters and
forged checks, the banks may
have exposed themselves to
liability.
This fraud may have been
prevented if the bank that
accepted the phony letters had
instituted policies requiring
review of the closing of multi-
ple third-party accounts by a
fiduciary. The sheer number of
requests (111) should have
alerted bank employees that the
activity was suspicious. Fur-
thermore, the fraud may have
been prevented if the banks
that accepted the forged checks
had conducted specialized
training for bank employees to
look for common signs of
forged checks. Here, multiple
deposits of third-party payee
checks by a fiduciary into a
personal account may have
served as a red flag for bank
employees.
OPPORTUNITY NUMBER 3:
REGISTER DISBURSEMENTS
Fast-Food Case Studies
Skimming cash at the point
of entry into a business is one
of the most common types of
cash fraud. In recent years, the
fast-food industry has seen an
influx of these types of schemes
whereby employees directly
take cash from the register
through the fraudulent use of
customer credit cards.
In the first case, a McDonalds
employee legitimately swiped a
customers credit card in pay-
ment of the customers order.
8
The employee then
allegedly swiped the card
a second time for the
same amount and pock-
eted that amount of cash
from the register. The
scheme was detected when
a customer noticed the
double charge on their
bank statement and com-
plained to the company.
In the second case, a Taco
Bell employee swiped a cus-
tomers credit card a second time
for an additional $20 or $30 after
the card had been swiped for the
correct amount.
9
The employee
maintained that he only added
the additional charge to punish
customers whom he considered
rude and that he did not appro-
priate cash representing the addi-
tional charge from the register.
However, the company noted that
all cash and credit receipts were
consistent with sales and that it
had not received additional funds
related to the scheme, indicating
that the employee kept the cash.
The scam was revealed when the
employees manager reported the
illegal transactions to the police.
40 The Journal of Corporate Accounting & Finance / November/December 2008
DOI 10.1002/jcaf 2008 Wiley Periodicals, Inc.
A simple request by board mem-
bers for documentation relating to
the investments may have pre-
vented the cash fraud.
JCAF20-1_20449.qxp 10/16/08 9:46 PM Page 40
In another case, a Wendys
employee swiped customers
credit cards for food-related
charges.
10
The employee then
allegedly used a handheld scan-
ner to record the credit card
numbers and expiration dates
where she could download the
numbers on dummy cards for
personal use at a later time. The
scam was detected when a con-
sumer noticed unauthorized
charges to her account.
Preventing the Fraud
In each of these cases, a
lack of supervision directly
contributed to the employees
opportunity to skim cash. If an
employee perceives that his
actions will go unmonitored, he
is more likely to partici-
pate in cash fraud. Com-
panies should properly
supervise lower-level
employees, whether by
management or techno-
logical oversight, to
reduce the risk of cash
fraud. In addition, man-
agement could have
detected the cash-fraud
schemes in the McDonalds and
Taco Bell cases by reviewing
sales records for irregularities.
Multiple entries for duplicate
charges should serve as a
warning signal for management
and require additional investi-
gation.
Finally, companies should
implement mechanisms that
encourage employees and cus-
tomers to report fraudulent
activities. According to the
ACFE, tips from employees
and, arguably, consumers, are
the number-one method by
which cash fraud is detected.
11
In each of the fast-food cases
noted above, the fraudulent
schemes were eventually
exposed by fellow employees
or by customers who had been
defrauded. Companies who
have ethics hotlines or opportu-
nities for employee and con-
sumer complaints are more
likely to receive information
pertaining to corporate cash
fraud.
OPPORTUNITY NUMBER 4:
PAYROLL FRAUD
Longshoreman Case Study
In May 2008, a Massachusetts
longshoreman, Joseph J. Picard
Jr., pled guilty to charges
related to his involvement in a
fraudulent payroll scheme.
12
Picard was a senior longshore-
man and head walking boss at a
Boston terminal, where he
supervised the loading and
unloading of container ships.
Allegedly, Picard was involved
in a scheme where senior long-
shoremen put their children on
the payroll. The scheme was an
attempt to place the children in
a position to reap union and
wage benefits, in the event that
they eventually became long-
shoremen.
While other senior long-
shoremen are under investiga-
tion for their involvement in the
scheme, Picard pled guilty to
forging timesheets for his oldest
son, garnering approximately
$12,000 in one year for wages
the son did not earn. In fact,
since the son was attending col-
lege, he could not have physi-
cally worked some of the
reported time. Picard also
admitted to recording three
hours of work for his eight-year-
old son.
Preventing the Fraud
While many payroll depart-
ments not only permit but
encourage direct deposit of
employee pay, businesses can
still guard against payroll fraud
by having an employee periodi-
cally distribute payroll checks
(or in the case of direct deposits,
stubs) directly to employees to
verify that each person receiving
payment is a legitimate employee.
Companies also should have
their accounting departments
confirm payroll payments with
employee records. In this case,
periodic distribution of
checks or check stubs
would have revealed pay-
ments to Picards sons,
and the distributing
employee would have
noticed that the sons were
not, in fact, working for
the company. Further-
more, random periodic
distribution of paychecks and
pay stubs, as well as a periodic
review of employee records,
may have discouraged the scam
in the first place.
Companies also may want to
review benefits and incentives
that they have in place that may
motivate employees to engage in
payroll fraud. In the longshore-
men case, it was the possibility
that their children could reap
future benefits (admittance to
the union and a higher entry-
level wage) that drove these
individuals to commit payroll
fraud and not necessarily the
short-term cash benefits that
they received. Companies
should note any potential poli-
cies or external factors that
could contribute to payroll fraud
The Journal of Corporate Accounting & Finance / November/December 2008 41
2008 Wiley Periodicals, Inc. DOI 10.1002/jcaf
If an employee perceives that his
actions will go unmonitored, he is
more likely to participate in cash
fraud.
JCAF20-1_20449.qxp 10/16/08 9:46 PM Page 41
and adjust payroll processes
accordingly.
OPPORTUNITY NUMBER 5:
EXPENSE ACCOUNT FRAUD
Financial Institution
Case Study
When a husband-and-wife
team, Saratou and Ronald
Stewart, pled guilty to charges
related to expense-account fraud
in 2006, they had embezzled over
$400,000 from CitiFinancial,
Inc.
13
The couple was able to
perpetrate the fraud because
Mr. Stewart served as a company
auditor in charge of approving
and overseeing employee
expense-account charges in
Canada.
In 2003, Mrs. Stewart (using
her maiden name) and a friend
opened two separate bank
accounts in Canada. Mr. Stewart
proceeded to create two ficti-
tious employees: one with the
maiden name of his wife and the
other with the name of her
friend. He then falsified expense
reports in their names. Over a
period of two years, he trans-
ferred money from CitiFinancial
into the two Canadian accounts
for reimbursement of expenses
to these fabricated employees.
Mr. and Mrs. Stewart then with-
drew the funds from the Cana-
dian bank accounts to purchase a
luxury vehicle and a new home
and property, and to make mone-
tary gifts to their friends and
family.
Preventing the Fraud
According to the ACFE,
employees generally use one of
four tactics to commit expense
account fraud: mischaracterization
of expenses, overstatement of
expenses, fictitious expenses,
and/or multiple reimbursements.
14
Management and internal and
external auditors should review
expense reimbursements for
employees when such amounts
are repeatedly disproportionate to
requests of similarly situated
employees. This is generally a
warning sign that the employees
have created fictitious expenses.
In this case, the expense reim-
bursements to Mrs. Stewart and
her friend should have triggered
an independent review in that
they were fairly large reimburse-
ments in a short period of time.
This case also shows the impor-
tance of hiring an external audi-
tor to review expense accounts,
since the fraud was committed by
the companys internal auditor in
charge of these accounts.
ADDITIONAL GUIDANCE FOR
PREVENTING AND DETECTING
FRAUD
As demonstrated in these
cases, not all frauds are head-
liners, and many large-scale
frauds start small. For this rea-
son, it is beneficial for manage-
ment to examine their own fraud
risk management program and
place more emphasis on detect-
ing and deterring small frauds.
Furthermore, small businesses
may be more susceptible to fraud
than larger businesses due to
their lack of antifraud measures.
The ACFE 2006 Survey found
that less than 50 percent of small
businesses had external audits,
less than 20 percent utilized
internal audits, and only 8 percent
had anonymous hotlines for
reporting frauds.
15
All organiza-
tions, large or small, should
implement an appropriate over-
sight function to detect and pre-
vent fraudulent practices.
Since cash is the asset most
often misappropriated, it is par-
ticularly important to put cash
management controls in place.
As demonstrated in the Auburn
professor case, cash misappro-
priations may be more likely in
small businesses due to the lack
of segregation of duties. While
the size of the business may be a
42 The Journal of Corporate Accounting & Finance / November/December 2008
DOI 10.1002/jcaf 2008 Wiley Periodicals, Inc.
Fraud Detection
Customer and vendor complaints
Employees living beyond means
Employees not taking vacations
Combining business and personal assets
Missing assets such as cash, supplies, or inventory
Unrecorded or misreported assets and/or liabilities
Unrecorded or misreported revenues and/or expenses
Delay in recording transactions
Errors in bank reconciliations
Errors in control account and subsidiary account reconciliations
Excessive write-offs
Missing documentation
Voided, missing, or destroyed checks
Exhibit 2
JCAF20-1_20449.qxp 10/16/08 9:46 PM Page 42
factor in implementing some
antifraud practices regarding
cash, it may be less of a factor in
implementing others. Even
though some antifraud measures,
such as conducting external
audits, maintaining internal audit
departments, or consulting a cer-
tified fraud examiner, may be
costly, the cost may be well
worth it in the long run. On the
other hand, some measures, such
as tip-lines, may not be as costly
and should be utilized on a
larger scale. Exhibits 2 and 3
include additional examples of
fraud detection and prevention
strategies.
Furthermore, Statement on
Auditing Standards (SAS) 99,
Consideration of Fraud in a
Financial Statement Audit, pro-
vides additional guidance for
curbing fraudulent practices.
16
SAS 99 was issued in the after-
math of large fraud scandals
such as Enron and WorldCom in
2002. Since auditors have the
responsibility to plan and per-
form the audit to obtain reason-
able assurance about whether
the financial statements are free
of material misstatement
whether caused by error or
fraud,
17
SAS 99 provides audi-
tors additional guidance on ful-
filling this responsibility as it
relates to fraud. For example,
guidance is provided to auditors
on maintaining professional
skepticism; discussions among
engagement personnel (brain-
storming) and between auditors
and others within the organiza-
tion; identifying, assessing, and
responding to fraud risk factors;
evaluating audit evidence; com-
munication about fraud to man-
agement and those charged with
governance; and documenting
the auditors consideration of
fraud. While not an integral part
of SAS 99, Section 316.86
includes management guidance
on preventing, deterring, and
detecting fraud.
The Exposure Draft, Man-
aging the Business Risk of
Fraud: A Practical Guide, rep-
resents a joint effort by the
Institute of Internal Auditors
(IIA), the American Institute of
The Journal of Corporate Accounting & Finance / November/December 2008 43
2008 Wiley Periodicals, Inc. DOI 10.1002/jcaf
Fraud Prevention
Reconcile bank accounts on a timely basis.
Secure incoming and outgoing mail.
Conduct employee background checks and employee exit
interviews.
Secure inventory and supplies.
Implement mandatory vacations.
Pay invoices from approved vendor list.
Encourage communication within organization.
Adopt a code of ethics.
Implement fraud policy.
Be proactive and deal with misconduct immediately.
Set the right tone at the top.
Conduct external audits.
Utilize internal audit department.
Conduct fraud training.
Exhibit 3
Antifraud Resources
American Institute of Certified Public Accountants:
www.aicpa.org
Institute of Internal Auditors: www.theiia.org
Association of Certified Fraud Examiners: www.cfenet.com
Financial Executives International: www.
financialexecutives.org
Information Systems Audit and Control Association:
www.isaca.org
Institute of Management Accountants: www.imanet.org
National Association of Corporate Directors: www.
nacdonline.org
Society for Human Resource Management: www.shrm.org
Committee of Sponsoring Organizations of the Treadway
Commission (COSO): www.coso.org
Exhibit 4
JCAF20-1_20449.qxp 10/16/08 9:46 PM Page 43
Certified Public Accountants
(AICPA), and the ACFE in pro-
viding guidance to boards, man-
agement, and internal auditors
in managing fraud risk.
18
The
Exposure Draft includes infor-
mation on fraud risk gover-
nance; fraud risk assessment;
fraud detection and prevention;
and fraud investigation. Exam-
ples also are included of a fraud
control policy; fraud risk assess-
ment framework; and fraud
detection and prevention score-
cards. Since it is managements
responsibility to put programs
and controls in place to prevent,
deter, and detect fraud, this new
guidance represents a valuable
management resource in fraud
risk management.
Other useful resources on
fraud detection and prevention
also are available, some of
which are included in Exhibit 4.
Management and those charged
with governance should con-
sider using these resources in
developing or improving their
own fraud risk management
programs.
NOTES
1. 2006 ACFE Report to the Nation on Occu-
pational Fraud and Abuse, http://www.
acfe.com/documents/2006-rttn.pdf at 4.
2. Id. at 25.
3. The three components are incorporated
in Statement on Auditing Standards No.
99, Consideration of Fraud in a Finan-
cial Statement Audit, AICPA (New York,
2002) AU 316.07.
4. See note 1, at 42.
5. Id.
6. U.S. Department of Justice. (2007, August
7). Former Auburn University professor
pleads guilty to wire, tax, and SBA fraud
charges. Retrieved August 28, 2008, from
http://www.usdoj.gov/tax/usaopress/2007/
txdv07lawing_plea.pdf.
7. U.S. Department of Justice. (2008,
February 7). Baltimore funeral home
owner sentenced to over four years for
defrauding customers and bank of over
$925,000 in prepaid funeral expenses.
Retrieved August 28, 2008, from http://
www.usdoj.gov/usao/md/Public-Affairs/
press_releases/press08/BaltimoreFuneral
HomeOwnerSentencedtooverFourYears
ForDefraudingCustomersandBankofover
925000.html.
8. Jones, R. (2008, May 23). Local
McDonalds employee arrested for fraud.
Retrieved August 28, 2008, from http://
cbs13.com/local/mcdonalds.fraud.atm.2.
731984.html.
9. Be nice to your fast food employees.
(2004, December 27). Retrieved August
28, 2008, from http://www.foxnews.
com/story/0,2933,142660,00.html.
10. Identity theft, with fries. (2007,
December 30). Retrieved August 28,
2008, from http://patterico.com/2007/
12/30/identity-theft-with-fries/.
11. See note 1.
12. Longshoreman pleads guilty, sentenced
for committing fraud and larceny. (2008,
May 20). Retrieved August 28, 2008,
from http://www.mass.gov/?pageID=
cagopressrelease&L=1&L0=Home&sid=
Cago&b=pressrelease&f=2008_05_20_
picard_jr_cop&csid=Cago.
13. U.S. Department of Justice. (2006, January).
Owing Mills couple pleads guilty to steal-
ing over $400,000 in bank fraud scheme.
Retrieved August 28, 2008, from http://
www.usdoj.gov/usao/md/Public-Affairs/
press_releases/press06/Owings%20Mills%
20Couple%20Pleads%20Guilty%20to%
20Stealing%20over%20$400,000%20in%
20Bank%20Fraud%20Scheme.html.
14. Mahadeo, S. (2006, October). Expense
reimbursement schemes. Retrieved August
28, 2008, from http://www.acfe.com/
resources/view.asp?ArticleID=623.
15. See note 1, at 41.
16. AICPA, Statement on Auditing Standards No.
99, Consideration of Fraud in a Financial
Statement Audit (New York, 2002) AU 316.
17. Id. at AU 316:01.
18. Managing the business risk of fraud: A
practical guide. (2007, November 12).
Exposure draft. Retrieved August 28, 2008,
from http://www.theiia.org/download.cfm?
file=46988.
44 The Journal of Corporate Accounting & Finance / November/December 2008
DOI 10.1002/jcaf 2008 Wiley Periodicals, Inc.
Leigh Redd Johnson, JD, is an assistant professor of business ethics and law in the Accounting Depart-
ment of Murray State University. Prior to joining Murray State, Johnson was a corporate and securities
associate at Womble Carlyle Sandridge & Rice, PLLC, in its Research Triangle Park, North Carolina, office.
Her work has been published in the U.C. Davis Business Law Journal, the Journal of Corporate Account-
ing and Finance, and the Journal of Corporate Taxation. Holly R. Rudolph, DBA, CPA, is a professor of
accounting at Murray State University. Her research interests include financial reporting for public and pri-
vate companies, auditor decision making, and accounting education. She has published in Auditing: A
Journal of Practice and Theory, the Journal of Accountancy, Internal Auditing, Advances in Accounting Edu-
cation, the Journal of Applied Business Research, the Journal of Education for Business, New Accountant,
and the Journal of Corporate Accounting and Finance.
JCAF20-1_20449.qxp 10/16/08 9:46 PM Page 44