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Financial Statement Fraud Casebook: Baking the Ledgers and Cooking the Books by Joseph T. Wells

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Chapter 10

The Spinster and the Investment

Eric Sumners

As you will see in the following story, all financial statement frauds are not in the billions of dollars. They only need to be big enough to be material to the financial statements.

Francine Gordon was considered a model employee of Small Town Federal Credit Union (STFCU). She had been STFCU's controller for more than 15 years and knew not only the accounting systems but also the data-processing systems extremely well. In fact, when the data-processing clerk was sick or on vacation, Francine would step into the position to make sure that the processes ran efficiently and as intended. Many employees at the credit union — including Francine — believed she knew more about the IT systems than the data-processing clerk. This reputation was built up over a number of years and few employees ever challenged Francine concerning credit union issues.

As with many small financial institutions, the separation of duties was not always practical due to finite resources and extremely tight budgets. Francine was highly intelligent and was an asset to STFCU in that she was able to function in an array of roles (accounting, data processing, member services, etc.) and was not the typical “that's not my job” employee. For years she helped out in many departments and took a leadership role in various projects. These experiences added to her skills and in-depth knowledge of the credit union's internal control systems. As time went on she became ...

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