ACC 646 Module 9 Milestone Three Example

Findings Report: Contract Hauling Invoices, North Quarry

[Student Name]

Southern New Hampshire University

ACC 646: Introduction to Forensic Accounting and Fraud Examination

Milestone Three

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Findings Report: Contract Hauling Invoices, North Quarry

Purpose and Engagement

This report was prepared at the request of the company's outside counsel to set out the results of an examination of invoices submitted by a contract hauler for hauling sand and gravel from the north quarry. It is intended for counsel and the company's owner and may be used in connection with legal proceedings. The work followed the AICPA's first forensic services standard, SSFS No. 1 (American Institute of Certified Public Accountants, 2019). It reports facts and calculations; it does not express an opinion on whether any person committed fraud, which is a matter for the trier of fact.

Scope and Procedures

The examination covered every invoice the hauler submitted from its first engagement in April 2022 through March 2025, a total of 9,800 loads and $5,880,000 paid. Procedures included matching each invoiced load to scale tickets and batch plant receipts; testing loads billed on quarry closure days and above the hauler's truck capacity; reviewing the vendor file, contract and conflict of interest disclosures; reviewing company email for the superintendent, the controller and accounts payable staff; reviewing public records of business ownership; examining the hauler's and an LLC's bank records produced under subpoena; and interviewing seven people. All electronic records were analyzed on verified copies, and the chain of custody for originals is documented in the working papers (Golden et al., 2006).

Finding 1: Invoiced Loads Without Delivery Records

Loads with no loading or delivery record, by year

Of the 9,800 loads invoiced and paid, 7,600 match both a scale ticket and a plant receipt. For 1,830 invoiced loads, no record exists that the material was loaded at the quarry or received at a plant. The company paid $1,098,000 for these loads. For 370 loads, a plant receipt exists but no scale ticket; the scale system was out of service on 12 days in 2023, and these loads are reported as unsupported rather than as loss. Of the 1,830 loads, 512 were billed on days the quarry was closed or in numbers exceeding the hauler's truck capacity.

Finding 2: Approval of the Invoices

All 9,800 loads were approved for payment by the north quarry superintendent. Accounts payable paid on his approval without requesting scale tickets. The company's conflict of interest policy requires disclosure of family relationships with vendors. No disclosure of a relationship with the hauler's owner is on file; public records and the superintendent's own statement confirm that the hauler's owner is his brother-in-law.

Finding 3: Payments From the Hauler

According to the hauler's bank statements, 31 payments totaling $412,000 went to a Nevada LLC formed in 2021 and managed solely by the superintendent's wife. No invoices, contracts or other documents describing services provided by the LLC were produced. The LLC's bank records show that its funds were used for a $68,000 vehicle titled to the superintendent, a $150,000 mortgage principal payment on the couple's residence, $96,000 of transfers to their joint account and $81,000 of cash withdrawals; $17,000 remains in the account.

Finding 4: Statements in Interviews

The scale operators stated that they were not asked to weigh loads that the hauler later invoiced and that scale outages were rare and recorded. The hauler's owner stated, with his attorney present, that he added loads to invoices beginning in 2022 at the superintendent's suggestion and paid part of the proceeds to the LLC as what he called commissions. The superintendent stated, with counsel for the company and a second interviewer present, that he approved invoices without checking them against scale tickets because he trusted the hauler, and that the LLC payments were for bookkeeping services his wife performed for the hauler. He did not provide documents supporting bookkeeping services. These accounts conflict; the report does not resolve them. The hauler's owner's statement is consistent with the timing of the LLC payments, which began two months after his first invoices were approved, and the superintendent's account is not supported by any bookkeeping records, engagement letter or tax filing by the LLC. Both observations are facts the trier of fact may weigh; neither is a conclusion about intent.

Finding 5: Control Failures

Five conditions allowed the invoiced loads to be paid without delivery records: a single approver for hauling invoices; payment without matching to scale tickets or plant receipts; no review of voided or missing scale tickets; no comparison of vendor ownership with employee relationships; and no enforcement of the conflict of interest disclosure requirement. These are reported here as facts; recommendations are presented separately to management.

Limitations

The examination did not cover hauling before April 2022, other haulers or schemes outside hauling. Cash withdrawals from the LLC could not be traced further, and no net worth or expenditure analysis was performed. The amounts unsupported are not included in the loss. Interviews reflect the statements made and were not under oath. If additional information becomes available, the findings may need to be updated (Association of Certified Fraud Examiners, 2023).

Timeline of Key Events

Key dates

The first payment to the LLC came two months after the hauler's first approved invoice. The rate of unmatched loads rose each full year until the letter was received, after which the controller began requiring scale tickets and unmatched loads stopped.

Summary

The company paid $1,098,000 for 1,830 loads for which no loading or delivery record exists, and a further $222,000 for 370 loads that are unsupported. Payments of $412,000 from the hauler reached an LLC managed by the superintendent's wife and were used largely for the household's benefit.

References

American Institute of Certified Public Accountants. (2019). Statement on standards for forensic services No. 1. Author.

Association of Certified Fraud Examiners. (2023). Fraud examiners manual (2023 ed.). Author.

Golden, T. W., Skalak, S. L., & Clayton, M. M. (2006). A guide to forensic accounting investigation. Wiley.