In his own words, Daniel Jones was “The Dude.” With his waist-long dreadlocks, part-time rock  band, and well-paid job managing a company’s online search directory—he seemed to have it  all. Originally from Germany, Jones, now age 32, earned his doctorate and taught at the  University of Munich before coming to the United States, where he started his career in  computers. In 1996, Jones started working with the company as a director of operations for U.S.- Speech Engineering Service and Retrieval Technology—working on a new, closely guarded  search engine tied to the company’s .net concept.  The company allows employees to order an unlimited amount of software and hardware, at no  cost, for business purposes. Between December 2001 and November 2002, Jones ordered or used  his assistant and other employees (including a high school intern) to order nearly 1,700 pieces of  software which had very low cost but were worth a lot on the street. He then resold them for  reduced prices—reaping millions. When items with a cost of goods sold of more than $1,000 are  ordered, an e-mail is sent to the employee’s direct supervisor, who must click on an “Approve”  button before the order is filled. In no individual order was the cost of goods more than 1,000— he made sure none of the orders required a supervisor’s approval. The loosely controlled internal  ordering system reflects the trust the company puts in its employees.  In June, FBI agents said they saw Jones exchanging a large box of software for cash in a  department store parking lot. The FBI contacted the company’s security and began monitoring  Jones’ bank accounts. Previously, one account with his bank had an average balance of  $2,159. In a short time, however, the average balance ballooned to $129,775. Another account at  another bank showed irregular deposits totalling $500,000—none of which appeared to be from  any legitimate income or other source.  Investigators also noted that Jones purchased a Ferrari F355 Berlinetta, a Jaguar XJ6, and traded  in lesser vehicles for a Hummer, a Mercedes 500SEL, and a Harley-Davidson motorcycle. He  also bought an $8,000 platinum diamond ring, a $2,230 wristwatch, and a $4,000 bracelet. “You  figured that I like big boy’s toys by looking at some of my pictures,” Jones wrote on his personal  Web page. “I just can’t resist.” The Dude’s Web page includes a camera for monitoring his cat  and photos of his yacht, cars, and other treasures. For a relatively low-level manager, it was an  impressive collection. But at his company, where teenage software engineers can earn more than  company directors, no one batted an eyelid.  Fraud Examination ACCT 2025 – Academic Year 2021/2022, Semester 2  Page 21 of 31  A neighbour across the street from Jones said that he was clearly wealthy, but not flamboyant  with his money. He described Jones as an intelligent man who didn’t flaunt his education, would  loan neighbours tools, and was always friendly. The neighbour was surprised to hear the  accusations against someone he called his friend. All he knew about Jones was that he was a  good neighbour who loved cars. “He was very, very helpful. The few times I had problems with  my PC, he’d come and help straighten them out,” the neighbour said. “They are just ideal  neighbours. I feel terrible for him and his wife." Jones and his wife lived in a modest 1960s splitlevel home.  In 2001, he joined the city's Rotary Club, "where he seemed more outgoing and personable than  the stereotype techie," said a local jeweller and immediate past president of the club. He seemed  like what I would expect a genius software developer to be."  In writing your response the following points must be addressed fully:  a) Determine if fraud was committed, and if so describe the symptoms of fraud that might be  evident to a fellow employee.  b) As discussed in units 1 to 4, all frauds involve key elements. Identify and describe using  examples the elements of the Jones fraud.  c) In the scenario, Jones' employer has been putting more emphasis on controlling cost. With  the slowing of overall technology spending, executives have ordered managers to closely  monitor expenses and have given vice presidents greater responsibility for statements of  financial positions. What positive or negative consequences might this pose to the  company in future fraud prevention??  d) Describe the company’s fraud prevention programme and identify any improvements that  might be necessary to prevent this type of fraud or at least discover it sooner.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

In his own words, Daniel Jones was “The Dude.” With his waist-long dreadlocks, part-time rock 
band, and well-paid job managing a company’s online search directory—he seemed to have it 
all. Originally from Germany, Jones, now age 32, earned his doctorate and taught at the 
University of Munich before coming to the United States, where he started his career in 
computers. In 1996, Jones started working with the company as a director of operations for U.S.-
Speech Engineering Service and Retrieval Technology—working on a new, closely guarded 
search engine tied to the company’s .net concept. 
The company allows employees to order an unlimited amount of software and hardware, at no 
cost, for business purposes. Between December 2001 and November 2002, Jones ordered or used 
his assistant and other employees (including a high school intern) to order nearly 1,700 pieces of 
software which had very low cost but were worth a lot on the street. He then resold them for 
reduced prices—reaping millions. When items with a cost of goods sold of more than $1,000 are 
ordered, an e-mail is sent to the employee’s direct supervisor, who must click on an “Approve” 
button before the order is filled. In no individual order was the cost of goods more than 1,000—
he made sure none of the orders required a supervisor’s approval. The loosely controlled internal 
ordering system reflects the trust the company puts in its employees. 
In June, FBI agents said they saw Jones exchanging a large box of software for cash in a 
department store parking lot. The FBI contacted the company’s security and began monitoring 
Jones’ bank accounts. Previously, one account with his bank had an average balance of 
$2,159. In a short time, however, the average balance ballooned to $129,775. Another account at 
another bank showed irregular deposits totalling $500,000—none of which appeared to be from 
any legitimate income or other source. 
Investigators also noted that Jones purchased a Ferrari F355 Berlinetta, a Jaguar XJ6, and traded 
in lesser vehicles for a Hummer, a Mercedes 500SEL, and a Harley-Davidson motorcycle. He 
also bought an $8,000 platinum diamond ring, a $2,230 wristwatch, and a $4,000 bracelet. “You 
figured that I like big boy’s toys by looking at some of my pictures,” Jones wrote on his personal 
Web page. “I just can’t resist.” The Dude’s Web page includes a camera for monitoring his cat 
and photos of his yacht, cars, and other treasures. For a relatively low-level manager, it was an 
impressive collection. But at his company, where teenage software engineers can earn more than 
company directors, no one batted an eyelid. 
Fraud Examination ACCT 2025 – Academic Year 2021/2022, Semester 2
 Page 21 of 31 
A neighbour across the street from Jones said that he was clearly wealthy, but not flamboyant 
with his money. He described Jones as an intelligent man who didn’t flaunt his education, would 
loan neighbours tools, and was always friendly. The neighbour was surprised to hear the 
accusations against someone he called his friend. All he knew about Jones was that he was a 
good neighbour who loved cars. “He was very, very helpful. The few times I had problems with 
my PC, he’d come and help straighten them out,” the neighbour said. “They are just ideal 
neighbours. I feel terrible for him and his wife." Jones and his wife lived in a modest 1960s splitlevel home. 
In 2001, he joined the city's Rotary Club, "where he seemed more outgoing and personable than 
the stereotype techie," said a local jeweller and immediate past president of the club. He seemed 
like what I would expect a genius software developer to be." 
In writing your response the following points must be addressed fully: 
a) Determine if fraud was committed, and if so describe the symptoms of fraud that might be 
evident to a fellow employee. 
b) As discussed in units 1 to 4, all frauds involve key elements. Identify and describe using 
examples the elements of the Jones fraud. 
c) In the scenario, Jones' employer has been putting more emphasis on controlling cost. With 
the slowing of overall technology spending, executives have ordered managers to closely 
monitor expenses and have given vice presidents greater responsibility for statements of 
financial positions.
What positive or negative consequences might this pose to the 
company in future fraud prevention?? 
d) Describe the company’s fraud prevention programme and identify any improvements that 
might be necessary to prevent this type of fraud or at least discover it sooner. 

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 6 steps

Blurred answer
Knowledge Booster
Forensic Audits
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education