Robatelli’s Continuing Case Solution – Chapter 3
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a. Considering the nature of the relationship between Robatelli’s home office
and its franchise owners, the company may be quite vulnerable to theft or
fraudulent financial reporting committed by these franchise owners. Describe
the three components of the fraud triangle and how each would relate to a
franchise owner’s likelihood to defraud Robatelli’s.
The three components of the fraud triangle are as follows:
• Incentive to commit the fraud. A franchise owner may be under financial
pressure (cash flow problems) or may have job-related pressures (bonus
options) that create the motivation to steal cash and/or falsify company
reports.
• Opportunity to commit the fraud. Since Robatelli’s generates a lot of
• Rationalization of the fraudulent action. Franchise owners may try to
justify a fraudulent act against Robatelli’s by claiming that the company
requires too much of the restaurant’s profits. For instance, a franchise
b. Identify three types of fraud to which Robatelli’s may be susceptible. For each
response, indicate whether the fraud is classified as management fraud,
employee fraud, vendor fraud, customer fraud, or computer fraud. In addition,
for each response, suggest an internal control that could be implemented to
prevent or detect the potential fraud.
Example of management fraud to which Robatelli’s may be susceptible:
analysis of trends in these summary reports and investigate unusual
activity.
Example of employee fraud to which Robatelli’s may be susceptible:
• Although skimming would be difficult for an individual employee to pull
off (due to the requirement for an entry to the POS system in order to
generate an order, and the need for an order to generate a cash receipt
Examples of customer fraud to which Robatelli’s may be susceptible:
• Credit card fraud or check fraud may occur if customers use stolen or
fraudulent credit cards or checks to pay for their orders. This may be
prevented through an immediate verification of all credit card collections
Example of vendor fraud to which Robatelli’s may be susceptible:
• A vendor may submit duplicate or incorrect invoices or may send
incorrect shipments to the company’s commissary. This may be
prevented by performing a vendor audit.
Examples of computer fraud to which Robatelli’s may be susceptible:
• Input manipulation may occur whereby an employee enters altered