As the director of the internal auditing and fraud investigation departments for a large retail company that buys and sells large volumes of products, you have received an anonymous tip from a confidential employee in one of the high-tech warehouses. The confidential employee noted that there was a major embezzlement taking place in one of the divisions. Members of the internal audit department had completed a routine review of the internal control of that division the previous year, and they found that the control system was properly designed and operating effectively. Only minor recommendations were made, and the next review is due 3 years later.
The confidential employee noted the erratic behavior and lavish lifestyle of the warehouse controller and stated that the controller has been over-riding existing controls, which would prevent any audit from being able to detect the embezzlement. The warehouse controller is well-respected and highly trusted by the chief executive officer (CEO) and the chief financial officer (CFO), and their families are involved in the same civic organizations. Investigating the plant controller could cause considerable disruption in the company and the personal lives of the employees.
• Given the situation, discuss some of the options that the company has for handling this situation.
• Assuming you decide to investigate these allegations, describe the investigation steps.
• In preparation for the interviews, note the order of the witnesses who would be interviewed and how you would plan, conduct, and document your interviews.
• Discuss how you would conduct an admission-seeking interview of the plant controller.
