FORENSIC ACCOUNTING CASE STUDY SERIES – SPONSORED BY DELOITTE

FAS LLP AND THE DELOITTE FOUNDATION SALES COMMISSION FRAUD -

BAGS MEDICAL DEVICE COMPANY CASE NO. 2-1
AUDIT FORENSIK – KELAS L

KELOMPOK 16 :
ANGGIA OCTAVIANY SUYANTO 041711333091
MUHAMMAD MIFTAH FARID 041811333161
ANANTA FATURRAHMAN P.H. 041811333180
 QUESTION:
1. In Appendix 1, complete the calculation of the following (20 Points):
a. Primary, Secondary and Total Commissions for each contract (columns G, H, and I of
tab “.1 Contracts by Year”).
b. Calculate the commissions paid by year for each individual in the “.2 Commissions
Paid” tab.
c. Complete a count of the number of contracts by individual by year in the “.3 Total
Contracts by Ind.” Tab.
Forensic Accounting Case Study Series — sponsored by Deloitte FAS LLP and the Deloitte Foundation
Sales Commission Fraud - Bags Medical Device Company
Case No. 2-1

Contracts by Year

Primary Primary Secondary Total

Contract # Contract Year Contract Date Primary Sales Rep Secondary Sales Rep Contract Amount Commission Commission Commission
544 2011 10/4/2011 Fred Jones No secondary sales rep $54,932.00 $5,493.20 $0.00 $5,493.20
545 2011 10/8/2011 Mark Esposito No secondary sales rep $53,982.00 $5,398.20 $0.00 $5,398.20
546 2011 10/14/2011 Mitchel Bogart Amanda Smith $39,469.00 $3,946.90 $1,973.45 $5,920.35
547 2011 10/16/2011 Fred Jones No secondary sales rep $2,690.00 $269.00 $0.00 $269.00
548 2011 10/16/2011 Amanda Smith No secondary sales rep $27,859.00 $2,785.90 $0.00 $2,785.90
549 2011 10/17/2011 Mitchel Bogart Amanda Smith $34,425.00 $3,442.50 $1,721.25 $5,163.75
550 2011 10/22/2011 Jim Jackson Fred Jones $30,648.00 $3,064.80 $1,532.40 $4,597.20
551 2011 10/25/2011 Ryan Leaf Fred Jones $39,260.00 $3,926.00 $1,963.00 $5,889.00
552 2011 10/28/2011 Brady Marshall Sandy McKnight $15,074.00 $1,507.40 $753.70 $2,261.10
553 2011 10/30/2011 Mitchel Bogart Amanda Smith $59,310.00 $5,931.00 $2,965.50 $8,896.50
554 2011 10/31/2011 Kelly Thomas Brady Marshall $7,211.00 $721.10 $360.55 $1,081.65
555 2011 11/3/2011 Jason Willis Sandy McKnight $8,724.00 $872.40 $436.20 $1,308.60
556 2011 11/3/2011 Mitchel Bogart Amanda Smith $25,572.00 $2,557.20 $1,278.60 $3,835.80
557 2011 11/8/2011 Jason Willis No secondary sales rep $15,245.00 $1,524.50 $0.00 $1,524.50
558 2011 11/11/2011 Mark Esposito Jason Willis $12,949.00 $1,294.90 $647.45 $1,942.35
559 2011 11/19/2011 Mitchel Bogart Amanda Smith $68,651.00 $6,865.10 $3,432.55 $10,297.65
560 2011 11/20/2011 Amanda Smith Laura Barber $26,071.00 $2,607.10 $1,303.55 $3,910.65
561 2011 11/26/2011 Jason Willis No secondary sales rep $8,795.00 $879.50 $0.00 $879.50
562 2011 11/30/2011 Inez Sanchez Jason Willis $29,555.00 $2,955.50 $1,477.75 $4,433.25
563 2011 12/6/2011 Mitchel Bogart Amanda Smith $34,041.00 $3,404.10 $1,702.05 $5,106.15
564 2011 12/12/2011 Laura Barber Ryan Leaf $17,305.00 $1,730.50 $865.25 $2,595.75
565 2011 12/18/2011 Laura Barber No secondary sales rep $22,003.00 $2,200.30 $0.00 $2,200.30
566 2011 12/19/2011 Mitchel Bogart Amanda Smith $33,771.00 $3,377.10 $1,688.55 $5,065.65
567 2011 12/24/2011 Kyle Freeman Sandy McKnight $16,803.00 $1,680.30 $840.15 $2,520.45
568 2011 12/26/2011 Mitchel Bogart Amanda Smith $18,603.00 $1,860.30 $930.15 $2,790.45
569 2011 12/30/2011 Mitchel Bogart Amanda Smith $66,464.00 $6,646.40 $3,323.20 $9,969.60
$21,952,897.00 $2,195,289.70 $550,922.30 $2,746,212.00
Forensic Accounting Case Study Series - sponsored by Deloitte FAS LLP and the Deloitte Foundation
Sales Commission Fraud - Bags Medical Device Company
Case No. 2-1

Commissions Paid

2008 Contracts 2009 Contracts 2010 Contracts 2011 Contracts Total Contracts 2008 -2011
Sales Representative Primary Secondary Primary Secondary Primary Secondary Primary Secondary Primary Secondary Total
Mitchel Bogart $80,289.40 $4,589.50 $71,592.60 $1,312.25 $59,821.30 $2,447.35 $47,278.20 $4,353.65 $258,981.50 $12,702.75 $543,368.50
Fred Jones $58,331.30 $9,859.10 $49,354.70 $3,719.70 $52,480.70 $6,884.45 $34,074.80 $8,123.90 $194,241.50 $28,587.15 $445,657.30
Amanda Smith $52,206.80 $8,879.50 $64,442.40 $1,020.85 $11,165.90 $29,559.55 $8,000.90 $34,974.95 $135,816.00 $74,434.85 $420,501.70
Willie Johnson $88,525.70 $4,383.90 $38,777.80 $19,143.10 $39,092.90 $5,382.10 $46,189.20 $13,091.10 $212,585.60 $42,000.20 $509,171.60
Ryan Leaf $47,866.00 $4,022.70 $9,517.40 $16,832.90 $4,449.50 $3,713.85 $26,158.20 $3,169.10 $87,991.10 $27,738.55 $231,459.30
Jim Jackson $43,791.90 $11,213.10 $37,911.40 $2,993.95 $34,912.20 $3,278.00 $30,670.70 $6,971.30 $147,286.20 $24,456.35 $343,485.10
Laura Barber $43,097.00 $18,174.00 $58,258.90 $9,550.70 $42,207.80 $16,175.20 $36,210.50 $11,749.80 $179,774.20 $55,649.70 $470,847.80
Sandy McKnight $20,854.30 $20,765.95 $6,524.50 $3,905.70 $35,794.60 $4,350.10 $20,805.70 $17,684.35 $83,979.10 $46,706.10 $261,370.40
Victoria Beckham $14,320.10 $5,271.90 $50,813.10 $19,032.90 $23,942.70 $5,667.50 $38,404.90 $2,261.90 $127,480.80 $32,234.20 $319,430.00
Inez Sanchez $51,409.30 $6,976.90 $24,630.00 $5,053.15 $25,234.60 $2,111.95 $36,807.50 $5,118.05 $138,081.40 $19,260.05 $314,682.90
Brady Marshall $72,734.70 $4,779.60 $27,778.20 $22,177.55 $19,282.20 $8,920.15 $23,285.00 $6,171.55 $143,080.10 $42,048.85 $370,257.90
Jason Willis $13,540.00 $15,715.90 $17,033.90 $13,195.25 $46,525.60 $356.30 $55,243.90 $10,794.95 $132,343.40 $40,062.40 $344,811.60
Kyle Freeman $12,885.00 $27,453.30 $41,948.40 $10,500.50 $27,749.40 $7,640.30 $377,499.50 $7,035.40 $460,082.30 $52,629.50 $1,025,423.60
Kelly Thomas $52,193.00 $7,238.75 $32,004.50 $11,679.85 $16,963.70 $1,813.95 $40,024.80 $2,297.90 $141,186.00 $23,030.45 $328,432.90
Mark Esposito $30,030.60 $16,140.40 $13,475.50 $2,787.70 $14,665.90 $1,362.90 $34,208.50 $9,090.20 $92,380.50 $29,381.20 $243,523.40
Total $682,075.10 $165,464.50 $544,063.30 $142,906.05 $454,289.00 $99,663.65 $854,862.30 $142,888.10 $2,535,289.70 $550,922.30 $6,172,424.00
Primary 10%
Secondary 5%
Forensic Accounting Case Study Series — sponsored by Deloitte FAS LLP and the Deloitte Foundation
Sales Commission Fraud - Bags Medical Device Company
Case No. 2-1

Total Contracts by Individual

2008 Contracts 2009 Contracts 2010 Contracts 2011 Contracts Total Contracts 2008 -2011
Primary # of Secondary # of Primary # of Secondary # of Primary # of Secondary # of Primary # of Secondary # of Primary # of Secondary # of
Sales Representative Contracts Contracts Contracts Contracts Contracts Contracts Contracts Contracts Contracts Contracts
Mitchel Bogart 17 2 15 1 14 1 13 2 59 6
Fred Jones 16 4 12 2 17 5 11 4 56 15
Amanda Smith 14 3 15 1 4 14 3 18 36 36
Willie Johnson 16 3 13 8 11 2 10 6 50 19
Ryan Leaf 8 2 4 7 2 2 7 2 21 13
Jim Jackson 8 4 12 1 13 2 10 3 43 10
Laura Barber 9 5 14 6 14 11 13 5 50 27
Sandy McKnight 7 7 4 3 12 3 8 12 31 25
Victoria Beckham 3 3 9 8 7 4 10 2 29 17
Inez Sanchez 13 4 7 2 8 2 9 3 37 11
Brady Marshall 12 2 6 13 8 4 6 5 32 24
Jason Willis 2 7 4 8 14 1 15 6 35 22
Kyle Freeman 4 11 8 4 12 6 10 3 34 24
Kelly Thomas 11 5 9 4 5 1 10 2 35 12
Mark Esposito 6 7 4 2 4 1 7 5 21 15
Total 146 69 136 70 145 59 142 78 569 276
Forensic Accounting Case Study Series — sponsored by Deloitte FAS LLP and the Deloitte Foundation
Case No. 2-1

Bags Medical Device Company

Income Statement
For the Period of January 1, 2008 to December 31, 2011

2008 2009 2010 2011

Revenue
Gross Sales 6,820,751.00 5,440,633.00 4,542,890.00 5,148,623.00

Expenses
Payroll 1,607,227.85 1,762,219.65 1,893,937.35 1,796,056.00
Commissions 847,539.60 686,969.35 553,952.65 657,750.40
Rent 450,000.00 460,000.00 470,000.00 480,000.00
Advertising 100,000.00 102,500.00 105,000.00 107,500.00
G&A 2,319,055.34 1,741,002.56 1,272,009.20 1,647,559.36
Total Operating Expenses 5,323,822.79 4,752,691.56 4,294,899.20 4,688,865.76

Net Income Before Taxes 1,496,928.21 687,941.44 247,990.80 459,757.24

Taxes (10%) 149,692.82 68,794.14 24,799.08 45,975.72

Net Income After Taxes 1,347,235.39 619,147.30 223,191.72 413,781.52

Commisions:
Average % of Sales 12.4% 12.6% 12.2% 12.8%
 QUESTION:
2. Describe how the fraud was perpetuated and by whom? (30 points)
Through collusion between key officers in the sales department, legal and accounting listed additional sale members
as secondary sales representatives on contract sale which allowed unmerited commission payment.
Members of staff who played key role on perpetuation of this fraud included:
1. Mitchel Bogart — Sales Rep
2. Amanda Smith — Sales Rep
3. Willie Johnson — Sales Rep
4. Carly McFinnigan — Accounting Clerk
5. Barry McMillan — Contracting Manager
There is a close relationship between these key personnel’s, both in the work place and personal life. Carly
McFinnigan who is an accounting clerk works with Barry McMillan doing reconciliations, entering data to the system
and salesmen listing respectively. No other party is involved in the checking of accuracy of entry and listing. The other
salesmen have spent most of their career in the sales department and this also may have contributed into
maneuvering ways of earning more than they should earn.
 QUESTION:

3. Quantify the amount lost by the company by the fraud occurring? (30 points)

We cannot quantify in monetary values because we do not have the actual list of the salesmen and their
respective sales activities which they undertook during the period.
 QUESTION:
4. List three recommendations you would provide to BMDC to prevent this fraud from
occurring in the future? (20 points)

a. One individual should not be given authority of doing all the processes like contracting manager who
is responsible for listing and confirmation of entered data.

b. The company should ensure high level of monitoring of the activities done by employees.

c. The company should rotate its employees to minimize the chance fraud.
TERIMA KASIH!