Acct 2212 - Fraud Triangle & Fraud Scale

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ACCT 2212 – Forensic Business Investigation Group Assignment

1. Fraud Triangle & Fraud Scale

The Fraud Triangle is a model to understand why people commit fraud from contributed by three different stages.

Perceived Pressure

Perceived pressure is one of the reasons that motivates the crime in the first place. In this case, Sonya had life pressures. She has two children that suffer from Autism, and they both need constant support and supervision daily. Sonya’s relationship with Michael also went downhill because of the many challenges they needed to face while taking care of their children that require special attention. The fact that all these happened led to her suffering from a “delusional disorder” (Winterford,2010), Clive Peeters distinguished that this caused her to be under the pressure to satisfy her desires, she had an undying passion to buy and sell properties. Therefore, the deterioration in her marriage, the responsibility and stresses of looking after two autistic children has resulted her in a constant need to buy properties.

Perceived Opportunity

Sonya duties with Clive Peeters involved dealing with payroll systems which included authorisation of salary payments to employees, payment of superannuation contributions and the remittance of group tax and payroll tax to the Australian Taxation Office and State Revenue Offices. Her being able to authorize the transaction and record it, gave her the opportunity to commit fraud (Battersby & McIlwraith, 2009). She transferred the money over to her bank accounts and then recorded that she transferred to a genuine account instead of her account number in the company’s books. It was clear that Clive Peeters had lack of controls as their internet banking system was flawed, furthermore they gave Sonya the duty to control the company’s money, and record it.

Rationalization

The third leg of the fraud triangle is rationalization, this takes place before the crime commence. Fraudsters must justify their crime to themselves in a way that makes it an acceptable act. In relation to Clive Peeters case, Sonya was overwhelmed with all the family problems that she was facing, leading to her having officially diagnosed with a delusional disorder where she was consumed with property trading. This gave her the excuse of having the need to take the company’s money and purchase all 44 properties.

The Fraud Scale suggests that when pressure, opportunity, and integrity are considered at the same time, one can determine whether a situation possesses a higher probability of fraud. The fraud scale provides that when situational pressures and perceived opportunities are high and personal integrity is low, occupational fraud is much more likely to occur than when the opposite is true.

Situational Pressures

Situational pressures are the immediate problems individuals experience within their environments. Although there was no pressure in her workplace, Sonya had been going through a lot in terms of her personal matters. Her family was the core to her fraud commitment, because of them, she suffered from a disorder that puts her into pressure for having the need to buy and sell properties as Justice John Forrest claimed that she was a “property wizard” (Draper,2010). Therefore, in terms of situational pressure, it is considered high under the fraud scale.

Opportunities to Commit

There was a loophole in the company’s accounting practice, it is clear that Clive Peeters lack internal controls as there was inadequate segregation of duties. Sonya’s position in the company allowed her to be in charge of manipulating the company’s funds without having the need for approval from higher authorities, she saw the opportunity to make use of this flaw in the accounting system. Hence, there was high opportunity to commit fraud.

Personal Integrity

Sonya had the decency to admit the truth and tell the authorities what she did because she got caught. Although she helped the police to recover most of the monies that she had used and she knew that her actions were out of control, she had indeed been exercising this fraud activity for around two to three years, it was not just a one off thing. Thus, her personal integrity was low, which leads to moderate fraud under the fraud scale.

2. Falsification of Accounts

Assuming Clive Peeters Ltd being a registered company in Singapore, to charge Sonya Causer under the fraud offence “falsification of accounts’ (Section 477A Penal Code), it is necessary to acquire evidences to prove the elements of the penal code before conviction.

Upon receiving full access to the company’s accounting systems and having the permission to electronically transfer funds to bank accounts, Sonya Causer, the payroll manager of Clive Peeters abused her authority and perpetrated $19.326 million from the company (Battersby & McIlwraith, 2009).

Causer defrauded by transferring company money to her own personal bank account, and two company that belongs to her for a period of 2 years. The theft was not pointed out immediately as she made amendments to the company’s financial records where she had control over by falsifying and concealing them (Battersby & McIlwraith, 2009). The falsification and concealment of financial records comprised of the manipulation of online banking records, the general ledger and management reporting.

To hold the position of a payroll manager, Causer must have possessed the quality of an accountant which proves that she clearly knew that her actions were violation to any accounting standards established. Hence, Causer’s actions of falsification and concealment revealed her deliberate intention in committing the fraud.

With the evidences stated above, Sonya Causer’s fraudulent actions matched the elements of Section 477A (Falsification of accounts). Therefore, she could be charged under “Section 477A Penal Code) and be punished with imprisonment for a maximum period of 10 years, or with fine, or both (Singapore Statutes Online, 2008).

3. The Collapse of Clive Peeters Ltd

Sonya Causer, an employee of Clive Peeters ltd, engaged in fraudulent activities involving 19.326 million within the timeframe of July 2007 July 2009 causing the organisation to suffer a complete loss of 3 million even after recouping 16.3 million (Draper, 2010).