Three elements of alleged employee dishonesty loss


Tonya Larsen is being investigated by law enforcement and Southern Appalachian Insurance Company.

Just before closing on March 2, 2011, the branch manager of Bank of Lawrenceville called Jennifer Anderson, MD, the CEO of Anderson Internal Medicine, to inform her that the medical practice’s checking account was overdrawn by $347.19 and the bank had returned four checks totaling $6,159.75 ($1,534.73, $1,783.83, $1,341.19, and $1,500.00). Dr. Anderson spoke with Tonya Larsen when she arrived the next morning. Tonya performed a bank reconciliation and announced that the shortage was the result of missing deposits – she had been depositing receipts only once a week. Tonya promised to track down and deposit the missing deposits. The two agreed to discuss the missing deposits and go over the books that weekend. Tonya Larsen spent the remainder of the next day in her office with her door closed and remained behind after the last patient and all employees left for the day. Dr. Anderson, who lives a mile from the office, arrived early the next morning, Friday, and went straight to Ms. Larsen’s desk. She found a trashcan overflowing with shredded paper. She immediately went to the file room where she found a giant trash bag also overflowing with shredded paper and patient files tossed haphazardly all around the file room. Many of the file folders were empty. Dr. Anderson attempted to access the accounting and payroll systems, but could not get into either computer system -- the passwords had been changed. She called in a forensic computer examiner, who successfully unlocked the computer, but found that much of the data on the hard drive had been erased and could not be retrieved. The following Monday a lawyer called the practice and left a message on the answering machine that he represented the Larsen’s and any inquiries that she or anyone else had must go through him.

Anderson Internal Medicine’s new office manager had been working for two weeks attempting to make sense out of the mess and file an employee dishonesty claim with Southern Appalachian Insurance Company. She found $260.00 in cash, $2,210.00 in patient and insurance company checks, and two business ATM cards in Tonya Larsen’s file cabinet. After getting a copy of an order form from the Bank of Lawrenceville, the new office manager obtained the ATM requisition form from the bank and discovered that Tonya Larsen obtained the ATM cards without the permission of Dr. Anderson. At her request, the Bank of Lawrenceville obtained facsimiles of cancelled checks and deposit tickets listed on the February 2011 checking account statement as well as the four dishonored checks.

Thus far, the SIU special agents found that Tonya, who lives with her husband in Canton, Georgia, previously worked for Absolute Orthopedics, Marietta, Georgia as the office manager. She resigned in March 2010 after the practice started bouncing checks. Absolute Orthopedics’ CPA determined that over $30,000.00 was missing. The practice filed an employee dishonesty claim with its insurance company (not Southern Appalachian Insurance Company), but could not definitively determine who caused the loss. The case was referred to the county sheriff’s office. Their investigation is still open.

1. What are the three elements of the alleged employee dishonesty loss? How much is the total verifiable loss from these elements?  [The three elements of the fraud are the three categories of fraud that you found (e.g., skimming).  Please also provide the items that make up that fraud (e.g., check #, check date, check amount).]

2. What are the alleged frauds (e.g., disbursement, embezzlement, larceny, payroll, skimming, other)? Discuss.

3. How were the alleged frauds concealed?

4. What circumstances allowed the alleged frauds happen (e.g., internal control failures, lack of background checks, missing policies and procedures) – be specific?

5. What would you recommend (e.g., controls, monitoring, etc.) to deter future frauds from happening – be specific?

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Accounting Basics: Three elements of alleged employee dishonesty loss
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