Quiz 9: Conversion Investigation Methods

With the help of given information we come to know there is likelihood of illegal income. We can use the net worth method to estimate the amount of unknown income. Based on this calculation, we determine that the suspect had at least \$ 146,800 of unknown income in Year 2 and \$20 0,800 of unknown income in Year 3. Note: Calculate the change in net worth on end of the second year: Net worth on first yearend = \$71,000 Net worth on second yearend = \$227,000 Calculate the change in net worth on end of the third year: Net worth on second yearend = \$227,000 Net worth on third yearend = \$439,000

Most of the perpetrators begin their thefts because of perceived critical need and they frequently continue to embezzle after their immediate need is met. An important focus in investigation involves determining how perpetrators convert or spend the stolen funds. In the same way here also we can see that Mr M. has made some very expensive purchases. Even though he has a valid reason for it but still the supervisor has doubt as heard about the complaints from new customers. All this shows fraudulent symptoms in the present scenario. By having a look on the financial information provided it becomes quit difficult to judge whether fraud is committed or not. As there are not major changes in the figures and Mr J also have a valid reason of property or money inherited by his late grandmother. So just on basis of the information available for the changes in the amount it is not possible to judge about commitment of fraud or embezzlement. If Mr M was suspected of committing fraud in the company, it is advisable for the supervisor to collect as much as financial information about Mr M from public records and other sources and have accumulated financial information of Mr M. With this information the supervisor can decide to investigate on all the financial information using the net worth asset method to determine how much is the amount of fraud or embezzlement done by Mr M. Assuming the company decides to investigate on the financial information of Mr M. we calculate the income from unknown sources by using the net worth asset method. Based on the above calculations, it is clear that Mr M has an additional income of \$ 3,030 at the end of month 2 and \$ 2,630 at the end of month 3.

The main motive of the initial frauds is generally found as critical needs of the perpetrators. But it has been a trend in them not to stop after the first episode. Rather, they try to escalate their lifestyle by committing more frauds. With the stolen fund they rarely invest or meet their liabilities, but in more occasions than not they spend the amount in leading a lavish lifestyle. Thus, this is the basic process of conversion of the stolen fund to the assets of the perpetrators. This is tracked by the investigators, in an attempt to find out the accused. The financial footprints are generally left behind by them when they buy a luxurious car, or an apartment. However, cash transactions are hard to be caught, but large transactions generally are not done in cash.

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