Canadian Accountant Caught Buying Nearly $7 Million Worth of iPhones and iPads With Company Credit Card

[tridley68]

Those crazy Canadians glad they caught them stealing from the company.

 

[matticus99]

So I wonder did they pay street price for these devices? Were they selling them for great than what apple charges?

 

[Black Magic]

Criminals always think they can't possibly be caught. And they are usually wrong. In this case, there was just too much evidence for it not to be discovered. A proper audit system would have caught it much quicker, though.

I disagree with with the criminals usually get caught comment. Most crime goes unnoticed or unsolved. She got greedy and didn't stop while the getting was good.

 

[Khedron]

$7m... So they bought like 4 iPad Pros each with Pencil 2s, AppleCare, and replacement tips?

 

[mdatwood]

This a common misconception about audits and isn't necessarily true. An audit is not designed to detect fraud. Auditors do not look at every transaction. They use a concept called materiality to determine what they do our don't look at as well as assessing internal controls. If this amount was under their materiality threshold, they may have never seen it. If she was doing this since 2011, then you can estimate that she was misappropriating about $875k per year. For a large company (as I'm assuming this is, since it was looking to go public), in a tech industry, purchases like this may not raise a red flag. The onus here is on the company's finance department for allowing this person to approve their own expenditures, as that's a blatant violation of segregation of duties and likely would have prevented this, unless there was collusion with another employee.

Moral of the story? An audit would not necessarily have detected this as audits are not designed to detect fraud. They are designed to determine whether financial statements are materially accurate according to generally accepted accounting principles.

Source: am CPA/auditor.

Spot on, particularly spending at Apple. We're a small company, and walking out of the Apple store with a 10k bill wouldn't raise any flags unless it was done repeatedly.

 

[Morgenland]

When they interviewed me for the job, they asked a simple question, "What does 2 + 2 equal?" I got up, closed the door, check the area for any listening devices. When I was certain no outsiders were listening, I answered, "What do you want it to be?"

You should write scripts for detective comedies.

 

[KUKitch]

Except, it has nothing to do with what I ‘think’, is everything with what I know from experience. I know for a fact that an audit would’ve detected this _specific_ type of fraud without question, regardless of an auditors intentions or not. My perspective is exactly that, a perspective with experience that works alongside auditors in loss prevention. Your interpretation of how things may correlate with each company audit are two things are not mutually exclusive and frankly, are inaccurate. Case in point.

That’s correct. That’s exactly what would’ve happened with a thorough audit _and_ fraud of this magnitude. There’s no way of something like this that would be completely undiscovered. Period.

You definitely don't know of this 'for a fact', especially if you've never worked as an external accountant/auditor... as the other poster mentioned with regard to materiality - if it is a large corporation with a high level of materiality, the transactions might never rise to the level where they would be selected. As mentioned, it's definitely a weakness that she approved all card purchases, including her own... but then I don't know that a financial audit would necessarily even look at all personnel who have cards (to be fair it's been awhile since I did external audits).

If it were an internal audit, then I might agree with you b/c they'd likely see something like that *if* they were doing an audit of key financial controls or something - which might not be considered high enough risk to be included in an annual internal audit cycle in a particular year. Given that audits are not generally designed to identify fraud, and the perpetrators whole efforts would be to conceal the fraud, it's fair to say that it might not be identified early. From my experience, those things more often get found out by accident, or because somebody was off sick, not by audits.

 

[Totorotarrot]

Well there goes 7 million dollars in future sales for Apple.

I’m sure the potential end-users will still likely buy phones. But if this scheme was based on reduced prices to move the phones, then those more umm... “budget minded” target buyers will probably be out of the market.

It sounds like it was a purchase at retail at someone else’s expense, then sell cheaper since she had no actual out of pocket expenses to make the initial purchase.

Otherwise, her profit would have matched or exceeded the 7 million dollars. If she only made 1 million, she was selling them considerably cheaper than the price her employer paid for them.

You didn’t read it right. She sold the goods probably at a slight discount to the wholesaler, who in turn sold to public at probably full price, because why not? The wholesaler can’t just sell some of his goods with a discount otherwise it would look suspicious, plus there is always demand for full price Apple products.

This means she probably sold the goods for $6m to wholesaler (a gain of $6m), who sold to public for $7m (a gain of $1m).

There is no way she sold it for $1m ($1m gain). If someone sold $7m worth of Apple products for less than $1m in Toronto everyone in the world would hear about it from word of mouth and travel there to buy one.

 

[Mousse]

You definitely don't know of this 'for a fact', especially if you've never worked as an external accountant/auditor... as the other poster mentioned with regard to materiality - if it is a large corporation with a high level of materiality, the transactions might never rise to the level where they would be selected. As mentioned, it's definitely a weakness that she approved all card purchases, including her own... but then I don't know that a financial audit would necessarily even look at all personnel who have cards (to be fair it's been awhile since I did external audits).

If it were an internal audit, then I might agree with you b/c they'd likely see something like that *if* they were doing an audit of key financial controls or something - which might not be considered high enough risk to be included in an annual internal audit cycle in a particular year. Given that audits are not generally designed to identify fraud, and the perpetrators whole efforts would be to conceal the fraud, it's fair to say that it might not be identified early. From my experience, those things more often get found out by accident, or because somebody was off sick, not by audits.

You are correct. An audit looks for inconsistency, not fraud. If a company with only 2 employee say it pays $100,000 in health insurance a year. Something ain't kosher. If a trucking company spends only $10,000 in diesel a year, red flag. A sudden spike in certain expenses is also a red flag. Red flag are not necessarily fraud though. A one time purchase could cause a spike an expense, which is totally legit.

In the case of the account manager purchasing boat loads of iPads and iPhones, that would have been caught by an internal audit. I'm assuming the company is a small business, since they accounting policy (no internal or external auditing, no oversight) is a joke.

A skilled accountant knows how to cook the books so that inconsistencies are minimized or even eliminated. If I looked over the accounts of several large corporations and there is fraud involved, I will probably not know. Anyone remember the Enron scandal? The accounting firm of Arthur Anderson (Enron's accounting firm) pulled the wool over the SEC's and Enron stockholder's eyes for years.