Question

Denise Stubbs, the Nancy Drew of forensic accounting, sat in her office pondering yet another financial mystery. Her client, Candace Goodwell, owns Salon Select and the building and land on which the building sits. The retiree, who spends her winters in Florida and her summers in New York, had just left Denise’s office after discussing a matter that was particularly troubling. Candace had relied on her office manager, D Maxwell, who had been with her for years, to obtain bids to resurface the parking lot at Salon Select while she was in New York. He had told her that he had obtained the bids and had engaged the lowest bidder to do the job.
Candace had recounted to Denise the conversation she had just last week with a repre- sentative of an asphalt company. She had been pleased with the resurfacing job when she had returned from New York on August 2 until Nick Woods, the representative, had stopped by the salon. Candace had happened to be in, and he had asked her if she needed her lot resurfaced. “Why, I had it resurfaced just three months ago,” replied Candace.
“That’s interesting,” said Nick. “I looked at the lot before I came in and, although it has the sheen of a new lot, the edges tell a different story.”
“What do you mean?” asked Candace.

“Well,” Nick continued, “the edge can indicate whether the lot is newly surfaced by the thickness and layers that exist. Of course, only drilling down and taking a sample will tell us for sure, but due to the relative thinness, I think you’ve been had.” “Egad!” exclaimed Candace. “I don’t understand how this could have happened. Where’s D? I need to ask him some questions!”
D was in the back office when Candace found him. “D, what happened? The man who was just here said that the lot might not have been resurfaced.” “No,” replied D, “he’s mistaken. Here, you can look at the paperwork.” “You know I don’t like to look at that stuff,” retorted Candace. “I just don’t know what to do. I can’t do anything now; I’ve got to run to attend a charity event in West Palm.” With that, she left. But the information was still bothering her. That’s why she men- tioned it to Vic Rickenbacker when she was in his office to discuss another matter. He had encouraged her to see Denise and, after some discussion, had solicited Candace’s permission to set up an appointment.
“Denise can do some preliminary investigation to determine whether you’ve received the service and product for which you have paid,” Vic told Candace. During the call to set up an appointment, Vic set up a fee arrangement whereby Denise, a CPA and CFF, would practice, for purposes of this matter, as his agent.
A few days later, Candace was in Denise’s office. “Hmmm,” said Denise. “I need your permission to interview your employees. Also, please don’t mention that you’ve come to see me. Sometimes it puts people on the defensive and I can’t get the information I need to do a good job for you. Just tell your employees that an office consultant—that’s me—might need to interview them for a project to improve the business and that they are to cooperate with her. Do you understand?” “Yes,” replied Candace. “Then I’ll get to work. By the way, when does D come in each day?” “Oh, usually not until the afternoon,” replied Candace. “Good,” thought Denise. “I’ll interview a couple of staff members in the morning and catch D when he arrives in the afternoon.” After Candace left the office, Denise began to think about a plan to collect the informa- tion she needed to draw a conclusion. “The lot may have been resurfaced and, then again, it might not have been.” She contacted a friend who owns an asphalt paving com- pany and asked him to take some core samples at the salon after it closed at 7:00 p.m. A few days later, the results were in: Five different core samples taken from different areas of the lot indicated that it had not been resurfaced. Denise had evidence. Her next step was to ask Candace to allow her to search the salon’s files for the invoice from the asphalt company. Once she had the name of the repaving company, she would do some searching to verify that the company existed. A quick search of the Internet did disclose the company, RJ New Look, along with its address and phone number. Denise slowly dialed the number and, when a voice answered, inquired about whether the company would be interested in repaving her lot. “Could you give me some references—some jobs that you’ve done in my area so that I can decide whether to use you?” She was hoping that Salon Select would be mentioned but, even if it wasn’t, she was prepared. When Salon Select was not mentioned, she brought it up. “There’s a busi- ness in my area whose parking lot looks great. I believe it’s . . . uh . . . Salon Select; yes, I’m sure of that. Do you know who did its lot?”

“Yes,” said the voice on the other end of the line, “we did that lot.”
“It must have been recent. Can you tell me when it was done?” asked Denise.
“Just a moment and I’ll check on that,” said the voice.
Within a few minutes, the voice returned. “It was done two months ago on July 22.”
“Thanks,” replied Denise, “I may be getting back with you soon about doing my lot. Goodbye.”
Denise arrived at Select Salon a few days later and interviewed a couple of employees. Both said the same thing: The asphalt job was done quickly on a Sunday. One of the employees said she’d driven by the salon going and coming from a friend’s house and said that the job could not have taken more than two hours. She was surprised that it took so little time.
When D arrived, Denise introduced herself as an office consultant and asked if she could ask him a few questions.
“I guess so,” replied D, “but make it quick. I have a lot of work to do.”
“I’ll do my best,” replied Denise. “By the way, the parking lot looks nice; did you have it repaved recently?”
“Oh yes,” he replied., “It was done early in June. The New Look Company did it for us. I was very pleased with the job.”
“Interesting,” replied Denise. “I was a consultant on a job recently. The job was to look into some fraud that had occurred. It seems that the company that was to resurface a parking lot simply put on a layer of thin coating so that it looked as though it had been resurfaced.”
D sat back abruptly in his chair. “Well, that certainly didn’t happen here!” he exclaimed, visibly shaken. “What was the name of the company you said resurfaced, or . . . er . . . pretended to resurface the lot?”
“I can’t mention names, D, but it was a local company. It works with insiders who receive kickbacks from the company,” replied Denise.
“Let’s get back to what you want to discuss, Denise, and leave the tawdry gossip for others,” said D.
“Actually, D, I’m here to talk about the parking lot. I know it wasn’t resurfaced. If you tell me what happened, I’ll let Candace know that you were cooperative. If you don’t, you will face harsher consequences.” D began to protest. “I did not . . .” but Denise cut him off immediately.
“Yes, you did,” Denise said firmly. “I have the evidence. Protesting only makes your situation worse. Right now, I’m just trying to understand why you did this. I know we all need additional money. Was it because you needed the money?”

a. Did Denise handle the events leading up to the interview correctly?
b. Did Denise handle the interview correctly?
c. Should Denise have approached the resurfacing company before she interviewed D?
d. What do you think will happen next in the interview?
e. What should Denise bring with her to the interview with D?
f. How you would have conducted the interview.

Answer 1

a. Yes,Denise handled the events leading up to the interview correctly.

b. Yes,Denise handled the interview correctly.

c. YES,Denise should have approached the resurfacing company before she interviewed D So that she can collect more evidence against the fraud.

d. I think next in the interview she will show the result of five different samples taken from the area that tells it had not been resurfaced. And then D will corporate.

e.The result of samples five different samples taken from the area that tells it had not been resurfaced.

f. I would have collected the result of samples first and made an interview with RJ newlook then with the evidence of all documents ,samples and witness come to saloon to interview D.