Heavenly Pastries, Inc. Heavenly Pastries, Inc. was founded in 1998 by Gary Houser in Boston, Massachusetts. Over the years, Heavenly Pastries grew from a small neighborhood shop to a national brand. In 2015 Heavenly Pastries went public. At the time of the public offering, there were 100 stores across the country, employing almost 1,000 employees. Over the next three years, Heavenly Pastries doubled the number of stores and employees. Corporate headquarters, still located in Boston, realized that the accounting information system needed to be upgraded. In May, 2019, the Information Technology Division (IT) was charged with upgrading the payroll software. The Division consists of two departments, Development and Operations. The Development Department is responsible for the coding and testing of the payroll software; the Operations Department is responsible for the operation and maintenance of the new payroll software. Steven Miller is the IT Division manager. Since he supervises both departments, Steve has global access to all aspects of the payroll software, including employee additions, pay rate changes, and employee benefits changes. Steven Miller has been with Heavenly Pastries for just over one year.
Gary Houser Heavenly Pastries- Information Technology Division
He has been struggling with a gambling addiction for the past five years and has run up considerable debts. Subsequent to turning control of the new payroll software over to the Payroll Department, and before the first payroll was run using the new system. Sarah Cutter, the payroll supervisor, is responsible for updating the new payroll system, inputting employee data (names, Social Security numbers, tax and benefit information) and pay rates. Discuss means more than one or two sentences.
1. The fraud triangle lists three conditions that are usually present when fraud occurs. Discuss the three conditions and if they are present. For each condition, provide examples from the case.
2. List the red flags present that suggest the possibility of frauds and what type of frauds do these red flags suggest?
3. How would the fraud impact the financial statements?
4. Discuss the procedures you would use to detect this fraud.
5. Lastly, discuss the procedures that should be implemented to prevent this fraud.