, PLEASE USE THIS DOCUMENT AS A GUIDE ONLY
QUESTION 1
1. Identify and critically discuss four (4) different schemes through which raw materials and
finished goods could be misappropriated at La Batho.
1. Larceny Schemes (Theft of Inventory)
Identification: This is the most basic form of inventory theft, where an employee simply takes raw
materials or finished goods from the company premises without attempting to conceal the theft
through false documentation (Association of Certified Fraud Examiners, 2024, p. 1.502).
Critical Discussion: Given La Batho’s highly decentralised operations across four production hubs
(Mbombela, Mooketsi, Botshabelo, Mafikeng) and approximately 1,850 employees, the opportunity
for simple theft is significant. Employees with direct access to inventory—such as warehouse
personnel, machine operators, or forklift drivers—could physically remove items like bags of maize
meal, cooking oil tins, or crates of canned vegetables. The manual notes that such schemes are often
committed by trusted employees who have access to restricted areas. The risk is heightened because
colleagues may ignore the theft due to misplaced loyalty, intimidation, or a "management versus
labour" mentality (Association of Certified Fraud Examiners, 2024, p. 1.504). The recent
unexplained shortages uncovered by internal audit are a classic red flag of possible larceny schemes.
2. False Shipments of Inventory
Identification: This scheme involves creating false shipping documents (e.g., packing slips) to make
it appear that inventory was sold or transferred to a legitimate customer or another hub, when in fact
the goods are being diverted to the perpetrator or an accomplice (Association of Certified Fraud
Examiners, 2024, p. 1.507).
Critical Discussion: This scheme is particularly relevant to La Batho due to the high volume of
goods moving between its four production hubs and across borders to Lesotho, Eswatini, and
Mozambique. An employee in the shipping or logistics department could create a false packing slip
for a fictitious cross-border shipment. The warehouse then releases the goods, which are delivered to
the employee’s address or an accomplice instead of a real customer. To conceal the theft, the
perpetrator might record a false sale on the books, creating a fictitious receivable. When the fake
customer never pays, the employee could write off the receivable to an account like bad debt expense
or discounts and allowances (Association of Certified Fraud Examiners, 2024, p. 1.508). The
movement of goods across borders makes physical verification difficult, increasing the viability of
this scheme.
3. Asset Requisitions and Transfers
Identification: This scheme involves using internal transfer paperwork or requisitions to move
inventory from one location to another under the guise of a legitimate business need, only for the
employee to steal the goods during the transfer process (Association of Certified Fraud Examiners,
2024, p. 1.505).
Critical Discussion: At La Batho, raw materials and finished goods are constantly being transferred
between hubs to balance supply and demand. An employee, such as a warehouse supervisor or
logistics coordinator, could falsify a transfer requisition, claiming that a specific quantity of cooking
oil is needed from the Mooketsi hub to the Botshabelo hub. Once the goods are loaded onto a truck,
the employee redirects the shipment or personally intercepts the goods. The manual highlights that
employees sometimes overstate the amount of supplies needed for a legitimate project and steal the
QUESTION 1
1. Identify and critically discuss four (4) different schemes through which raw materials and
finished goods could be misappropriated at La Batho.
1. Larceny Schemes (Theft of Inventory)
Identification: This is the most basic form of inventory theft, where an employee simply takes raw
materials or finished goods from the company premises without attempting to conceal the theft
through false documentation (Association of Certified Fraud Examiners, 2024, p. 1.502).
Critical Discussion: Given La Batho’s highly decentralised operations across four production hubs
(Mbombela, Mooketsi, Botshabelo, Mafikeng) and approximately 1,850 employees, the opportunity
for simple theft is significant. Employees with direct access to inventory—such as warehouse
personnel, machine operators, or forklift drivers—could physically remove items like bags of maize
meal, cooking oil tins, or crates of canned vegetables. The manual notes that such schemes are often
committed by trusted employees who have access to restricted areas. The risk is heightened because
colleagues may ignore the theft due to misplaced loyalty, intimidation, or a "management versus
labour" mentality (Association of Certified Fraud Examiners, 2024, p. 1.504). The recent
unexplained shortages uncovered by internal audit are a classic red flag of possible larceny schemes.
2. False Shipments of Inventory
Identification: This scheme involves creating false shipping documents (e.g., packing slips) to make
it appear that inventory was sold or transferred to a legitimate customer or another hub, when in fact
the goods are being diverted to the perpetrator or an accomplice (Association of Certified Fraud
Examiners, 2024, p. 1.507).
Critical Discussion: This scheme is particularly relevant to La Batho due to the high volume of
goods moving between its four production hubs and across borders to Lesotho, Eswatini, and
Mozambique. An employee in the shipping or logistics department could create a false packing slip
for a fictitious cross-border shipment. The warehouse then releases the goods, which are delivered to
the employee’s address or an accomplice instead of a real customer. To conceal the theft, the
perpetrator might record a false sale on the books, creating a fictitious receivable. When the fake
customer never pays, the employee could write off the receivable to an account like bad debt expense
or discounts and allowances (Association of Certified Fraud Examiners, 2024, p. 1.508). The
movement of goods across borders makes physical verification difficult, increasing the viability of
this scheme.
3. Asset Requisitions and Transfers
Identification: This scheme involves using internal transfer paperwork or requisitions to move
inventory from one location to another under the guise of a legitimate business need, only for the
employee to steal the goods during the transfer process (Association of Certified Fraud Examiners,
2024, p. 1.505).
Critical Discussion: At La Batho, raw materials and finished goods are constantly being transferred
between hubs to balance supply and demand. An employee, such as a warehouse supervisor or
logistics coordinator, could falsify a transfer requisition, claiming that a specific quantity of cooking
oil is needed from the Mooketsi hub to the Botshabelo hub. Once the goods are loaded onto a truck,
the employee redirects the shipment or personally intercepts the goods. The manual highlights that
employees sometimes overstate the amount of supplies needed for a legitimate project and steal the
