Skip to Main Content

Volume 9, Issue 1

IMA Educational Case Journal
ISSN 1940-204X

Articles

Marla A. Kraut, Ph.D., University of Idaho
Jason C. Porter, Ph.D., University of South Dakota
Amber Gray, University of Idaho

BASED ON REAL EVENTS ASSOCIATED WITH THE FRAUD COMMITTED BY RITA CRUNDWELL IN DIXON, ILL., this case provides basic classroom discussion with regard to internal controls, fraud prevention, and the ethical responsibilities of management accountants. The case focuses on Cathy Clark, City of Dixie’s accounting specialist, as she begins to realize that the comptroller and treasurer, Kimberly Hedges, may be responsible for embezzling significant city funds by circumventing internal controls and misrepresenting financial reporting of the stolen funds. There were several signs that fraud might be occurring, but for some reason no one in the City of Dixie noticed the signs of this extreme fraud case. Students are required to use the fraud triangle to identify internal control weaknesses and fraud risk factors and to consider the ethical responsibilities of management accountants in preventing fraud.
Keywords: Internal controls, embezzlement, ethical behavior, fraud reporting, city government
Matthew Fish, Ed.D., CMA, University of Wisconsin Eau Claire
D’Arcy Becker, Ph.D., CPA, University of Wisconsin Eau Claire

THIS TEACHING CASE EXAMINES HOW work-related injuries, left unmanaged, can threaten the growth of an organization. Emphasis is placed on the cash flow stresses caused by an escalating work-related injury problem at a growing manufacturing firm, the integral role accounting information plays in managing those injuries, and how incentive pay pegged to work-related injuries can cause fraudulent behavior without proper internal controls. This teaching case will challenge students to understand the limitations of traditional financial statements in managing complex business problems and the role of performance metrics in helping managers set targets to solve challenging business problems. The potential unintended consequences of poorly designed performance metrics are the main takeaway lessons from this case. This case is based on a real set of circumstances that took place at a manufacturing firm located in the United States. The name and industry of the organization along with the individuals it employed have been changed to protect the identity of everyone involved.
Keywords: Work-related injuries, performance metrics, incentive pay, fraud.