ISSUES IN ACCOUNTING EDUCATION American Accounting Association

Vol. 26, No. 3 DOI: 10.2308/iace-50003

2011
pp. 569–591

Accounting Fraud at CIT Computer Leasing

Group, Inc.
Jeffrey E. Michelman, Victoria Gorman, and Gregory M. Trompeter
ABSTRACT: The case chronicles a newly promoted manager’s search to uncover an
inventory fraud that had been perpetrated by her supervisor at CIT, a publicly held
company. During the ensuing investigation, CIT and the Florida Department of Law
Enforcement identified 36 different transactions involving the diversion of nearly 2,500
computers, with a conservative estimated total loss to the company of $637,000.
Students are also exposed to the importance of internal controls, red flags, the fraud
triangle, and forensic accounting techniques. The case also lets the reader see what
occurs when, due to management override of internal control, a subordinate no longer
trusts a supervisor’s communicated information. This can be used at the undergraduate
or graduate level in an Accounting Information Systems, Internal Auditing, or Auditing or
Fraud/Forensic Accounting class. The Teaching Notes also have an accompanying
video, in which the investigators and prosecutor discuss issues related to the case,
including the specifics of the case, whistleblowers, and the fraud triangle, and the roles of
law enforcement and the judiciary. Included in the video are interviews with the Florida
Department of Law Enforcement investigators and the prosecuting attorney that were
involved in the CIT case.
Keywords: fraud; auditing; forensic accounting; internal controls.

INTRODUCTION

O
n a warm, bustling August 2004 morning, outside of CIT’s Jacksonville, Florida, building,
it felt like the stillness after a storm. Haley Werle sat at her desk, reflecting on the events
that occurred at CIT in the past six weeks. How many hundreds of thousands of dollars
worth of computers were stolen because an employee in a managerial role was able to override the
company’s system of internal controls?

Jeffrey E. Michelman is a Professor at the University of North Florida; Victoria Gorman is an Internal Audit
Analyst at Fortegra Financial Corporation; and Gregory M. Trompeter is a Professor at the University of
Central Florida.

We acknowledge the research assistance of Alex Lyubimov, Caroline Roberts, Michael McCauley, and Kyle
Gammon, and the invaluable help in class-testing provided by Neil Schreiber, Robert Slater, and Tony Amoruso.
Further, we thank Alan Reinstein and Jeff Cohen for helpful comments on the manuscript, and Tim Bell for his efforts
related to the development of the associated video. We are also indebted to the Florida Department of Law
Enforcement, the State Attorney’s Office for North Florida and, especially, Michael Antal, John Farmer, and Steve
Siegel for their assistance with the video and the case. Finally, we appreciate the hard work of Kevin Neu in the
production of the video.

Published Online: August 2011

569
570 Michelman, Gorman, and Trompeter

She looked out her door at her former supervisor, Kaveh Niakan’s, empty office. A few months
ago, no one would believe that this man would be fired for selling CIT’s computers to
non-approved resellers and pocketing the proceeds. However, looking back, Werle realized that red
flags were there all along. She was glad that she uncovered the fraud, but worried that she waited
too long to report her discoveries. She thought about the month she spent gathering information
before she felt confident notifying upper management of her suspicions. How many assets were lost
during this delay? More importantly, how could this go unnoticed for so long in a large,
sophisticated company like CIT?
CIT Group, Inc. was a Fortune 500 global commercial finance company that provided
financing and leasing products to many industries worldwide. With 2004 net income of $754
million, its Equipment Leasing division made up 16 percent of the company’s total assets. This
division specialized in leasing computers, copiers, and fax machines to companies, schools, and
universities. At the end of the lease, customers could buy the equipment or return it to CIT.
CIT hired Werle in March 2000 as a Vendor Account Specialist, after obtaining a B.A. in
Business Administration from Flagler College.1 Within two years, she was promoted to Senior
Vendor Account Specialist to manage CIT’s relationships with its used computer resellers. Werle
also interacted with the Credit Department, reviewed credit reports from Equifax, and
recommended appropriate action. In April 2004, she was promoted to Remarketing Inventory
Manager. In that position, she oversaw off-lease equipment that was returned to CIT’s Jacksonville
office, and managed the warehouses to which CIT would resell (or ‘‘remarket’’) this off-lease
equipment. If a customer wished to return equipment at the end of a lease, her team would send a
return authorization to the lessee, instructing them to send the equipment for resale to an approved
warehouse/computer reseller.
Niakan supervised Werle. He was born in Iran and attended college in London. He was an
outspoken opponent of the current Iranian regime. Several members of his family settled in the
United States, and Niakan helped support them. Niakan was generous to his family and coworkers.
His subordinates viewed him as a great boss. He was married with two young children. Werle
remembered Niakan mentioning that he and his wife went through several rounds of expensive in
vitro fertilization before they had their twins.
CIT hired him in January 2000. In October 2001, his supervisor, Senior Vice President Denise
Thompson, promoted him to Director of Asset Management. In addition to her professional
relationship with Niakan, Thompson also had a social relationship with him. They saw each other
outside of work and occasionally had dinners with each other’s families. However, their friendly
relationship did not prevent Thompson from criticizing his performance when it fell below
expectations. In his 2002 Annual Review, Thompson warned Niakan that his team needed to
improve end of lease sales and inventory returns. As a publicly traded company, CIT placed much
pressure on Niakan to meet monthly budgets. As Director of Asset Management, Niakan was
responsible for the Remarketing Department that Werle managed and the End of Lease Department,
making him in charge of all returning off-lease assets at the Jacksonville branch.
Werle thought back to the biggest red flag that alerted her that something was amiss. On July
14, 2004, when Niakan was out of the office for a few days on business, a customer—PGT
Industries—called to inform CIT that it had returned its leased equipment as instructed. Werle
replied that she did not authorize PGT to return any equipment. She checked her files and found no
record in the Inventory Tracking System, letters database, or Infolease system of anyone sending
PGT authorization to return their equipment to a remarketer.

1
CIT uses the term ‘‘vendor’’ to refer to off-lease (i.e., used) computer resellers. However, to avoid confusing
computer resellers with other vendors (i.e., companies that provide supplies to CIT), we use the term resellers in
the case.

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PGT said it received faxed instructions, but Werle was confused. The return authorization
referenced a warehouse name and address that she did not recognize as an approved CIT remarketer.
The equipment was directed to go to Venture c/o Tim Williamson. That name sounded familiar. Werle
remembered hearing Niakan mentioning a friend named Tim Williamson. She was baffled. She could
not understand why the customer would receive a return authorization listing a non-approved
remarketer and thought to herself, ‘‘I will discuss this with Niakan when he gets back.’’
Meanwhile, she looked up Venture on the Florida Secretary of State website to discover its full
name was Venture Fitness. This made no sense. Why was CIT’s office equipment being sent to a
fitness company in Jacksonville? Werle had never heard of them. She drove by Venture after work
on July 15th to check it out for herself. Venture sold fitness equipment. It had a few bays, but no
docks or loading ramps that were typical of CIT’s contracted warehouses.
For the next few days, Werle examined her records to see if other non-approved warehouses
had received shipments. She found E-Remarketing, owned by Nasser Kadkhodaie. Becoming
suspicious, Werle distinctly remembered Niakan mentioning Nasser as a close friend. Two
unapproved computer resellers, who happened to be Niakan’s good friends, had received CIT
assets. Werle decided to investigate E-Remarketing in person. Driving by the company, she saw it
was in a little office with no sign on the door. It did not look like an appropriate location capable of
receive large equipment deliveries. Why would Niakan violate company policy by overriding
internal controls and selling computers to an unapproved remarketer—a related party who was a
personal friend?
Werle then recalled other previously dismissed red flags. She remembered how Niakan would
ask his End of Lease team and Werle’s Remarketing team to always notify him when large amounts
of computer equipment were slated for return. He told her it was because he could make good deals
for CIT. Werle thought back to a July 13th event, just one day before the PGT phone call. Werle
received notice of a large computer shipment that was being returned by Regis High School. Since
Niakan was out of the office, Werle decided to research some CIT-approved remarketers. Niakan
called Werle at the office later that day to check in:
Niakan: So, how is everything going back at the office? Any news?
Werle: Things are going great. Actually, we expect a shipment of computers back from Regis
High School. I have started looking into a few remarketers that might sell these for us.
Niakan: A new shipment? How big?
Werle: It’s pretty big—about 50 computers.
Niakan: Ok, listen. I will handle this contract when I get back, ok?
Werle: I do not mind doing this one. I know you are busy. I can handle this.
Niakan: No. Do not do anything with these contracts. I will personally take care of them, ok?
Werle: Ok . . .
Werle remembered feeling dissatisfied with this conversation, believing she could handle this
account. Why was Niakan so reluctant to let her deal with it? She continued to research remarketers.
The next morning, just hours before the PGT phone call, Werle found a sticky note on her desk
from Niakan and a copy of the Regis High School lease. Attached to the top of the lease was an
E-Remarketing business card that said, ‘‘Nasser has the better deal now.’’ But Werle did not believe
that Niakan had sought bids from anyone other than his friend Nasser. Niakan was out of the office.
How could he have negotiated with multiple companies in such a short time?
Continuing her research to find other laptop purchasers, on July 16th, she decided to offer the
computers to Dauer Business Services, based in Chicago. They had contacted Werle previously,
looking for off-lease equipment to resell. Werle sent them an email pricing offer request for the
described equipment. Dauer offered her $240 per laptop. When Niakan returned to the office on
July 19th, Werle asked what Nasser was offering. She remembered this conversation vividly:

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Werle: You left a note on my desk saying that Nasser has the best deal for the Regis High
computers. I was wondering, just how much is he willing to pay?
Niakan: He is willing to pay more than any of our other remarketers. That’s why I am letting
E-Remarketing have this deal.
Werle: But how much will he pay per laptop?
Niakan: Oh, I do not have the exact figure off the top of my head.
Werle: How about an estimate?
Niakan: Um, let’s see . . . it was . . . Nasser will pay us $225 per laptop.
Werle: $225? Well, I contacted Dauer, and they gave me a better offer—$240 per laptop.
That’s $15 more than Nasser’s offer. I am going to give them the deal instead of E-
Remarketing.
Niakan looked surprised, but did not protest. Dauer was not an authorized remarketer either,
but Werle did not think this would be a problem. She would occasionally see computers sold to
remarketers not on the CIT approved reseller list. Previously, she did not think to question this
deviation from company policy. Niakan ran the office, so Werle assumed that this was normal.
Werle sighed. Why had she not asked more questions while she was training? Why have a
pre-approved reseller policy if no one checked to verify that it was followed?
After visiting Venture Fitness and E-Remarketing, Werle realized that those locations could not
be appropriate resellers to receive CIT equipment. Werle wanted an explanation of why Niakan sent
computers there, so later that day she went back to see him. She took the faxed copy of the return
authorization from PGT to Niakan’s office. She placed the fax on his desk.
Werle: I have a question. I received this fax from PGT indicating that you wanted them to ship
their computers to Venture. Why would you instruct them to ship to this reseller?
Niakan: PGT? Oh, I took care of that already. It’s done. Do not worry about it.
Werle: Well, Venture is not on the list of approved remarketers.
Niakan: So? We do not only sell to resellers on that list. How many times have you seen me
use a different reseller? I go with whoever has the best deal.
Werle: But Venture is not even a remarketer. It sells fitness equipment. And I have not seen
any checks coming in from Venture for any sold computers.
Niakan: Oh, well, they . . . uh . . . I will look into that and see why that is.
Werle: What is going on?
Niakan: You do not want to know about it.
Werle: What do you mean by that?
Niakan: I mean do not worry. We will get our money by month end.
Werle: This month or next month?
Niakan: Umm . . . it should be here by next month . . . Listen, I made a bad deal, ok? I already
called the guy at Venture and I threatened to cut his arms off if he did not pay. So he will
pay. Listen, you do not want to know what I do sometimes, but you will reap the benefits
because I bring in a lot of money. So do not worry about what I do. Shannon did not worry
about it. She just let me do my job. I think you are taking on too much. You need to ease
up on your work load a bit. Just pass on all of the large computer transactions to me and I
will take care of them. They take too much time and you have enough to do. I can get the
good deals on them. I am a good salesman. I am a hustler, you know, I can make things
happen. So do not worry about it, ok?
Werle remembered leaving Niakan’s office feeling unsettled. She recalled that Shannon Geiser
was the Remarketing Inventory Manager prior to her. Why did she not question Niakan’s actions?
She also did not understand why Niakan wanted her to pass on more work to him. He often
complained about his responsibilities and how he had no time to manage his other team.

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A few days later, Werle saw that Niakan entered notes into the Infolease system for the PGT
contract stating that he took care of this account. Notes like this would cause those working on this
account to refer all questions directly to him. Two weeks later, on August 3, Niakan was out of the
office again when mail for the End of Lease Department arrived on his desk. As the manager in
charge while he was away, Werle would go to his desk and distribute the mail accordingly. One
item on his desk that day was an invoice from Tantara, a freight company CIT recommends to their
customers. CIT also used Tantara for repossessions. When Niakan was training Werle, he informed
her that he would take care of all Tantara invoices.
Because she knew how invoices were paid, Werle decided to turn this one into the accounting
department for payment. She wanted Niakan to have one less item to deal with when he returned to
the office. The invoice was for the pickup and delivery of equipment from the University of North
Dakota to the same suspicious Venture Jacksonville location. It appeared as a large amount of
computer equipment. Werle called Tantara to identify the Venture invoice, and Tantara asked her to
clarify which Venture invoice she was referring to, since they had multiple deals regarding
deliveries of computer equipment to Venture. Werle became alarmed. Not only were large amounts
of equipment going to this unauthorized company, but CIT was getting billed for the shipping.
Werle had then rarely seen equipment sent to non-contracted remarketers, and even less frequently
would CIT pay for the shipping.
Werle could not ignore this. On August 16th, one month after that initial suspicious phone call
and fax from PGT, Werle asked Thompson, Niakan’s supervisor, to talk to her privately. They went
into a conference room and Werle told Thompson about her suspicions that Niakan was using his
authority to override the system of internal controls and conducting shady transactions. She
mentioned that Niakan directed PGT’s off-lease computer equipment to his friend Tim Williamson
at Venture Fitness, and that he gave the Regis High School account to his friend Nasser. Further, he
had CIT pay to ship the equipment from the University of North Dakota to Venture, even though
this was against company policy. Thompson decided to conduct an internal audit.
During the two-week audit, CIT discovered that Niakan had diverted part or all of the proceeds
from several shipments of computers from April 4, 2003–August 2004. Also, several companies,
including Venture Fitness and E-Remarketing, never remitted payment to CIT for this equipment.
They also discovered invoices for the shipment of equipment to Venture that Niakan had signed off
on and turned in to Accounts Payable for payment, even though it was not CIT’s policy to cover
shipping costs. Finally, there was evidence that, although computers that were placed with
unauthorized remarketers were entered into the Infolease system, they were being sold for
below-market prices to those remarketers. There was no doubt in anyone’s mind that fraud was
occurring at CIT.
Meantime, Niakan continued to divert company assets. At one point during those two weeks,
he handed Werle a copy of an $82,125 check from Asset Recovery Specialists and told her to close
out a University of North Dakota contract for 565 laptops. But Niakan did not know that Werle had
already spoken to the Asset Recovery Specialists representative and found out that the check was
for the purchase of only 365 laptops. Niakan had diverted the other 200 laptops to Venture.
At the end of the audit, Thompson arranged a meeting with Niakan and several corporate
executives who flew in from New York. Werle did not attend the meeting, but Thompson told her
what occurred. Niakan’s demeanor changed significantly from the start to the end of the interview.
He first answered questions easily and confidently. As the questions turned to his relationship with
E-Remarketing and Venture Fitness, Niakan became increasingly flustered. He explained that
Venture was a drop-off site for Karl Griner, with whom he had a one-time deal to sell computers.
He could not explain why some Venture accounts were closed with no payment and why some
assets were never entered into the Inventory Tracking System. He slumped down lower and lower

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in his chair. Finally, he said, ‘‘I am not going to incriminate myself further. Make whatever
decisions you are going to make.’’ He was asked to leave the office.
After some deliberation, CIT called Niakan to inform him that he was fired. CIT’s Corporate
Office also contacted the Florida Department of Law Enforcement (FDLE) to begin a criminal
investigation. Three days after Niakan was fired, Karl Griner called Werle at her office. He
informed her that he had a weird conversation with Niakan the night before. He said Niakan told
him he had been fired from CIT. Griner told Werle that he had purchased computers from Niakan.
He had some ready to be shipped to his buyers, but after the conversation with Niakan he was not
sure if he was getting them ‘‘legit.’’ He wanted to know if he should send the money to CIT.
Werle wanted to find out more about how Griner and Niakan conducted business. She asked
Griner how these computer sales would occur. He explained that Niakan would call him when he
would have 15 to 75 computers available. Griner would then pick up the computers from Niakan’s
home or from a drop-off point called Venture. He would buy the computers from Niakan for $220
to $250 apiece, paying Niakan by check, and would put Niakan’s name, not CIT, as the payee. He
said he was made to believe that the money he paid Niakan was given to CIT. Griner started buying
the computers from Niakan about a year ago.
He would sell them to a distributor in Lakeland, Florida, paying $20,000–$25,000 for the
computers. Griner said that after talking to his wife, he was unsure about Niakan and would rather
deal with CIT directly. He told Werle that Niakan gave him her number and told him to call. He
also told Werle that he was an officer with the Jacksonville Sheriff’s Office. Werle thought it was
odd that an officer would deal with computers without knowing whether they were received
legitimately. Also, Griner’s figures did not add up. Paying $20,000 to $25,000 for 200 to 300 units
equals about $100 per computer, less than half of the $220 apiece that he claimed to pay, and far
less than the computers were worth. At the end of the conversation, Griner gave Werle his cell
phone number and she said she would get back to him about these computers. Werle notified FDLE
and they seized the stolen CIT assets from Griner’s residence.
Werle then thought back to other red flags. When Niakan trained her, he told her to record only
a set amount of inventory each month to ‘‘smooth’’ earnings, as all public companies managed
earnings. He even had certain remarketers hold inventory in a separate file and pay separately, so
the inventory would not appear in CIT’s system.
Werle remembered when Niakan prepared a monthly aging report for Thompson. Werle asked
to see this report, but Niakan did not want to show it to her. She persisted and then he sent it to her,
warning her that the figures would not match what was in her system. He told her that he took out
some accounts to keep Thompson off his back. Reconciliations were never performed to make these
numbers match because there were too many exceptions going back too far. Thompson never
checked that Niakan completed the monthly reconciliation of remarketers. Niakan also directed
employees to send contracts with large amounts of computer equipment directly to him, so he could
control the disposition process for accounts to close unpaid accounts without raising suspicion.
Werle also recalled Niakan mentioning how expensive it was for his wife to try and have children
through in vitro fertilization. Niakan had financial pressure at home coupled with earnings targets at
work. How did she not spot these issues earlier?
CIT had several controls in place to handle off-lease inventory appropriately. Once the decision
was made by the lessee to return the equipment, the lessee would be sent return authorizations
indicating where to ship them. When the remarketer received the equipment from the lessee, they
forwarded a report to the CIT inventory manager to notify them of the equipment’s receipt. The
inventory manager then updated the Inventory Tracking System and inventoried the asset in the
Infolease system. When selling the asset, the remarketer forwarded a check to CIT with the sale
proceeds. The inventory manager then forwarded the information to the cash operations department
to apply the proceeds and close the contract. If funds were received after an inventoried contract

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was closed, the funds were applied to the contract. This allowed CIT to have an audit trail and
record the funds to the inventory valuation account. Unfortunately, no one reconciled the significant
differences between expected Infolease balances and actual balances.
Niakan circumvented the controls by stepping into the middle of the process to set up a
separate system that he controlled. He would review the Financial Reporting group’s report that
showed contracts with large residuals that had lease dates expiring within the next six months. The
report was generated as a forecasting tool to help negotiate equipment prices with remarketers.
Niakan used this report to determine the assets that could easily be sold outside of the normal
process. Rather than let an inventory specialist be involved in the process, he spoke directly with the
lessee and had the assets sent to an unauthorized remarketer. The remarketer did not forward
information to the Inventory manager to notify her that the assets were returned. Without this
information, it was very difficult to determine if the assets were delivered.
When computers would come off-lease, Niakan would often sell them to both unauthorized
and authorized vendors. This strategy was particularly effective with large quantities, such as
shipments from the University of North Dakota. In these cases, he would have the computers
delivered to two separate locations—one authorized remarketer (e.g., Asset Recovery Specialists,
Inc.—ARS) and one unauthorized (e.g., Venture)—the authorized entity would remit payment to
CIT and the unauthorized entity would remit payment directly to Niakan. Thus, if 500 computers
came off-lease and 300 went to ARS for $250 each and 200 went to an unauthorized dealer who
paid Niakan directly, the system would show 500 computers being shipped out and $75,000 (i.e.,
300 3 $250) being received in exchange. This process was further flawed in that the lease
agreements all required the lessee to send the computers to whatever location they were instructed
to by CIT.
During the audit process, CIT and FDLE indentified 36 different diversions of CIT off-lease
equipment, with a conservative total loss to the company of $637,000. A financial analysis revealed
that checks were written to Niakan personally to purchase CIT off-lease computers. The related
investigation also revealed multiple cash transfers between Niakan, Griner, and Nasser. Griner and
Nasser paid far less than the fair value of the computers they received.

EPILOGUE
On February 20, 2006, the Salem, New Hampshire, Police Department arrested Kaveh Niakan
for extradition to the State of Florida on April 11, 2006. He pled guilty to two counts of Third
Degree Grand Theft. He was sentenced to three years in jail and agreed to pay CIT restitution of
$300,000, payable in $200 monthly installments. He did not have to repay the full amount he stole
because it was never determined what happened to that money.
At his sentencing, he never admitted that what he did was wrong. He conveyed a sense of
entitlement to the stolen funds; he did admit to taking the money because of the financial pressure
that he was under at home. Because of his two young children and no prior criminal record,
Niakan’s three-year sentence was much lighter than allowed by law. Niakan was released from the
Florida Department of Corrections on January 1, 2010. Upon his release from prison, Niakan
petitioned the Department of Immigration and Customs Enforcement to remain in the U.S. His
petition was granted because it was deemed that sending him to Iran would be sending him to a
hostile environment.
While Fortune 500 companies such as CIT seldom prosecute fraud cases to avoid bad
publicity, the company and SVP Denise Thompson made an example out of Niakan. Most stolen
assets were not recovered. Denise Thompson left CIT shortly after Niakan’s conviction. Haley
Werle continues working as a CIT manager. On December 31, 2007, CIT sold its Equipment
Leasing division to Macquarie Group. Two years later, it filed for Chapter 11 Bankruptcy protection
(Spector et al. 2009).

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CASE LEARNING OBJECTIVES AND IMPLEMENTATION GUIDANCE2

Learning Objectives

A. To understand how internal controls are important for preventing and detecting
accounting fraud.
B. To understand why segregation of duties is important and how it can easily be
circumvented.
C. To understand the role of the Internal Control-Integrated Framework in preventing and
detecting fraud.
D. To understand the relationship between fraud and audit risk.
E. To understand the Internal Auditor and CPA’s role for detecting accounting fraud.
F. To understand the fraud triangle and its importance in preventing and detecting
accounting fraud.
G. To understand the role of red flags in detecting accounting fraud.
H. To understand the role of basic forensic techniques for examining accounting fraud.

Implementation Guidelines
General Comments
The case was developed from the case file prepared by the office of the state attorney, plus
interviews with the Florida Department of Law Enforcement lead investigator and the state attorney
who prosecuted the case. One of the authors was also hired by the defendant’s attorney to provide
forensic analysis to challenge the veracity of the state’s charges and the scope of the accused fraud.
The forensic analysis supported the methodology and charges by the state, but estimated the amount
of the fraud at approximately $250,000. The expert witness’ analysis was used in the defense’s
eventual plea bargain. All of the events in the case are real, as are all names, places, and time
periods described.
We find that one of the most important things to consider when using this case is to make sure
that students understand that this is completely based on a real case. The case was initially
developed and pretested as a traditional case (i.e., without the video). However, in pretesting, we
found that additional input from the case’s investigators and prosecutor would be helpful. We thus
developed a video to supplement the case. In the video, investigators and the prosecuting attorney
assigned to the case discuss the specifics of the case. In addition, they discuss broader issues: the
fraud triangle, forensic investigation, corporate cooperation with law enforcement, and matters
related to the prosecution of fraud as they apply to the case.

Applicable to Multiple Classes

We find that the multiple dimensions of this case allow it to be used in accounting information
systems, internal auditing, auditing, or fraud/forensic accounting. In fact, when pretesting the case
in one class, a student commented that they had seen the case in an earlier class, but the instructor
now focused the issues toward auditing this time, and they therefore saw the case from a different
point of view and it allowed them to explore different issues.3

2
To facilitate case selection and curriculum design, we have developed a summary schedule that provides a brief
description of fraud cases that have appeared in Issues in Accounting Education over the past ten years (see
Appendix A).
3
Since we did the pretesting in two phases and used students in the same institutions, it was possible to have a
student see the case a second time.

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Further, by bringing in issues related to the accounting profession and changes that have
occurred in the 21st century, the case can easily be used in graduate classes to achieve a higher level
of learning using Bloom’s taxonomy (Bloom et al. 1971) applied to case teaching (Naumes and
Naumes 2006). In this respect, the case facilitates analysis and integration of broad issues through
the use of the illustrations in the case. Students are then asked to discuss these issues with peers and
to aggregate them as a class. Depending upon the level of the class and time available, we suggest
that these results are easily integrated with discussion question 10 in a way that allows the faculty
member to drive home the importance of internal control, fraud prevention and detection, and
auditor responsibility in the changing context of professional and regulatory influences.

Three Pedagogical Options

Three different teaching suggestions are detailed below. The first teaching suggestion is the
traditional use of the case for a single 75-minute class meeting; time and board plans are provided
for this suggestion. The second teaching suggestion is to use the case in two 75-minute classes
(either consecutively or at different points in the semester). The third suggestion, which allows for a
more intensive use of the case as a springboard for advanced discussion, requires the use of the case
across multiple class sessions. In all three options, we begin by using question 1 as an ice breaker to
tease out the facts of the case and get students engaged in the discussion.4

Use of the Video

What makes this case somewhat different is the option to use the 49-minute video depicting
interviews with the three law enforcement officials involved in the case. The video can help the
instructor adapt to students who have a more visual—as opposed to auditory or kinesthetic (i.e.,
hands on)—learning style. (For a discussion of learning styles, see Mayer [2003], but also see
Pashler [2009]). Supporting our decision to include a video are findings suggesting that a variety of
teaching methods are helpful to students with different learning styles. Boatman et al. (2008)
suggest that variety in teaching methods can maximize learning outcomes for students with
different learning patterns. That claim is further supported by research in the education field (Stokes
2002).
The video is broken up into seven chapters (see Table 1 for a detail of chapter contents) that
could be integrated or used separately, depending upon the needs of the instructor, and the video’s
table of contents can be used to navigate between the chapters. The video has been designed to
allow the instructor to select relevant chapters to tailor the video to the specific needs of their
course. For example, while the (approximately) eight-minute Chapter 4 may be a very useful way to
introduce the fraud triangle in an introductory auditing class, it may be too elementary for an
advanced class level in fraud and forensic accounting. We recommend that the instructor view the
video and make use of the guidance in Table 1 to determine how best to tailor the video for their
specific needs/class.
As a general rule, we suggest that a minimum of 30 minutes of discussion take place before
showing the video, as the video may take discussion in a different direction and might relieve
students from analyzing the facts of the case.
We learned from pretesting that students wanted to know what happened to Kaveh Niakan. As
a result, we think that in all three approaches it is important to show Chapter 2 of the video and use
the information from the epilogue to discuss what happened to Niakan. The rest of the video helps

4
The three options detailed in this section assume a 75-minute class period. Different class periods would, of
course, require adaptation. For instance, if one is teaching a 50-minute class, we would suggest that the case be
assigned and discussed in one class session and the 49-minute video be shown in the subsequent class session.

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578 Michelman, Gorman, and Trompeter

TABLE 1
Video Organization
Chapter Contents Time
Chapter 1: Introduction 6:00 minutes
Chapter 2: The Perpetrator Kaveh Niakan 6:05 minutes
Chapter 3: The Whistleblower Haley Werle 3:00 minutes
Chapter 4: The Fraud Triangle As a Tool for Law Enforcement 8:22 Minutes
Rationalization
Pressure
Opportunity
Chapter 5: Forensic Investigation Interviewing the Defendant 11:14 Minutes
Building a Case
Eliminating Explanations
Estimation of Loss
Knowing the Law
Chapter 6: Cooperating with Law Enforcement Decision to Investigate 7:19 Minutes
Why Corporations Do Not Cooperate
Collection of Evidence
Bringing in the Prosecutor
Being Skeptical
Chapter 7: The Decision to Prosecute Beginning the Investigation 7:19 Minutes
Prosecutorial Discretion
Support of the Corporation

to reinforce this, as the three members of law enforcement often touch back to Niakan in their
explanations.
Option 1. Use of the case in one or two class meetings. Given the variety of avenues for
discussion, there are many possible uses of the case for a single class meeting. The time plan for a
75-minute class meeting is divided into six steps, as follows:
a. Review of the main points of the case as provided by students in discussion, assuming that
the case has been assigned for reading prior to the class meeting (five minutes).
b. Put a timeline on the board—with student input—of the events that took place throughout
the case (20 minutes). Use Figure 1 in the Teaching Notes as necessary (for a single class,
we would introduce the video here).
c. Invite the class to suggest challenges faced by Haley Werle as a whistleblower. Narrow the
list to (initially) one issue for further assessment (draw on questions 2–4 and 8–9,
depending on the class and level) (ten minutes).
d. Discuss Haley Werle’s role in uncovering the fraud and both how it was perpetuated and
how this changed over time (questions 6–8 and 10, depending upon the class level) (ten
minutes). The instructor might choose to show Chapters 1, 2, and 3 of the video at this
point (11 minutes).
e. Break the class into small groups for focused discussion of how the fraud could have been
prevented and how CIT might have used the COSO framework more effectively (questions
4, 7, 8, and 11) (15 minutes).
f. Have groups give feedback from their discussions to the class as a whole. Each group
presents their recommendations on what CIT might have done differently to prevent the
fraud and what Haley Werle might have done to uncover it (15 minutes).

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Accounting Fraud at CIT Computer Leasing Group, Inc. 579

FIGURE 1
Case Timeline

The board plan for this application begins with segmenting the board into three sections from
the students’ viewpoint (left, center, right) as follows:
a. Left side of the board: prior to group discussions, summarize the main points of the case
under the subheadings of main actors, synopsis of the case scenario, and internal control
issues.
b. Right side of the board: the timeline of the events that took place (or use Figure 1,
depending on the time available).
c. Center part of the board: after group discussions, the issues faced by Haley Werle both in
terms of challenges she faced and techniques she used to uncover the fraud.
Figure 2 might be used to facilitate a different type of discussion, depending upon the focus of
the class, and could be substituted for any of the three above, as the professor deems appropriate.
Option 2. Use of case in consecutive classes or a comprehensive presentation throughout
the semester. Because the case follows a long time period for the organization, this case may also
be used throughout the semester to illustrate and provide a point of departure for discussing key
topics, theoretical perspectives, methods, and practical strategies covered in the course at hand. In
this more detailed analysis, we again suggest that the video be presented/discussed after the students
have analyzed the facts. Of course, the nature of use depends on the course being taught. For
example:
 In an accounting information systems class, it could be used early on to illustrate preventive
versus detective controls and the role of COSO’s Internal Control-Integrated Framework.
The case could then be used later in the term, when the Inventory Cycle is presented, to
focus on the importance of internal controls in preventing and detecting fraud (questions 1,
2, 3, and 4).

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580 Michelman, Gorman, and Trompeter

 In an Internal Auditing course, the case can be used to discuss Internal Auditing’s role in
testing controls and facilitate compliance with Sarbanes-Oxley Section 404. Further, the
case facilitates discussion of the internal auditor’s responsibility for detecting fraud,
understanding the fraud triangle, and red flags (Chapter 4 of the video could either be
shown or replayed at this point) as part of the internal audit process (questions 4 and 7).
 In an Auditing class, the case might be presented at the beginning of the term to discuss the
role of the CPA in society and society’s perception of CPAs (question 6). Later in the term,
the case could be revisited to consider internal control and the COSO framework (questions
2 and 4). It could also be helpful in discussion of analytical review, materiality, red flags,
fraud, and audit risk, as well as audit issues related to inventory (questions 5–8 and 11).
 Finally, the case could be used in a Fraud/Forensic Accounting class to discuss the fraud
triangle and to focus on red flags as both preventive and detective tools (questions 7, 8, and
11). It can also be used to examine forensic analysis—especially for discussion related to
inventory. The instructor might choose to focus on the use of Chapters 4, 5, and 6 of the
video.
For an advanced or graduate class, the instructor might choose to use question 10 and Figure 2
to facilitate one whole class discussion. One additional approach would be to use the video at the
beginning of the second class after completing the first approach.
Option 3. Our third approach is geared toward fifth-year students. In this case, we suggest
the instructor either use the case questions as a structure for assigning research topics or assign
some of the readings presented below in preparation for the discussion questions. In this approach,
the instructor might choose to use the abbreviated presentation for the first class after the students
have read the case, use question 1 for discussion, and then follow up with a class meeting on each
of the additional questions 2 through 10. To facilitate preparation or to suggest additional class
readings for each of questions 2 through 10, we offer the following as references:
1. Analyze the difference between preventive and detective controls and give an example of how
each could have been used by CIT with respect to this fraud.
Journal of Accountancy. 2008. Official Releases (December): 112–134.
Lister, L. M. 2007. A practical approach to fraud risk. The Internal Auditor (December): 61–
67.
Locatell, M., and D. Hotz. 1999. Achieving business benefits through reporting on internal
controls. Bank Accounting and Finance (Summer): 40–48.
Nigrini, M. 2006. Monitoring techniques available to the forensic accountant. Journal of
Forensic Accounting 7 (2): 321–344.
2. Three duties must be segregated in an organization; analyze how Niakan’s role at CIT violated
segregation of duties.
American Institute of Certified Public Accountants (AICPA). 2005. Management override of
internal controls: The Achilles heel of fraud prevention. New York, NY: AICPA.
Avellanet, A. 2009. The COSO guidance on monitoring internal control. Internal Auditing 24
(2): 3–4, 6–11.
Bowen, A. K. 2010. A fraud case study: The Skim Sisters. The CPA Journal (January): 12–15.
Klamm, B., and M. Watson. 2009. SOX 404 reported internal control weaknesses: A test of
COSO framework components and information technology. Journal of Information
Systems 23 (2): 1–23.
Lewis, D. P. 2010. Protect what you produce. Dental Economics (January): 80–82.

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Accounting Fraud at CIT Computer Leasing Group, Inc. 581

Marden, R., and J. Woods. 2009. What a racquet! Internal Auditing (September/October): 27–
34.
Parham, A. G., J. A. Kelly, and T. Buckhoff. 2009. Help your nonprofit customers prevent
fraud. The RMA Journal (December/January): 78–84.
Simmons, M. 1997. COSO based auditing. The Internal Auditor 54 (6): 68–73.
3. Analyze how the five components of COSO Internal Control-Integrated Framework could have
been used to prevent fraud at CIT.
Avellanet, A. W. 2009. The COSO guidance on monitoring internal control. Internal Auditing
(March/April): 3–11.
Beasley, M., S. R. Clune, and D. Hermanson. 2008. The impact of enterprise risk management
on the internal audit function. Journal of Forensic Accounting 9 (1): 1–20.
Frazier, D. R., and S. L. Spradling. 1996. The new SAS No. 78. The CPA Journal (May): 40–50.
Klamm, B. K., and M. W. Watson. 2009. SOX 404 reported internal control weaknesses: A test
of COSO framework components and information technology. Journal of Information
Systems 23 (2): 1–23.
Olach, T., and S. Weeramantri. 2009. How COSO has improved internal controls in the United
States. Internal Auditing (November/December): 3–12.
Savage, A., C. S. Norman, and K. Lancaster. 2008. Using a movie to study the COSO internal
control framework: An instructional case. Journal of Information Systems (Spring): 63–77.
4. In 2004, CIT had a net income of $754,000,000. Equipment Leasing was 16 percent of CIT’s
total assets. The stolen computers were valued at $637,000. Is the amount of this fraud
considered to materially impact the financial statements? If not, what other audit implications
can this fraud have? How would the auditor test for something like this?
CPA Governmental & Nonprofit Report. 2007. AICPA issues SAS 107 in the Audit Risk
Assessment Series (April): 4–8.
Holmes, W. J. 2008. Taking the measure of materiality. Pennsylvania CPA Journal (Fall): 6–8.
Hubbard, L. 2005. Limits of process documentation: Narratives, flowcharts, and other process
descriptions constitute only one component of internal control evaluations. The Internal
Auditor 62 (3): 26–27.
Kranacher, M. 2007. Determining materiality: Relativity and professional judgment. The CPA
Journal (August): 80–81.
Liebesman, S. 2005. Using internal auditing to mitigate risk from the Sarbanes-Oxley law.
ASQ World Conference on Quality and Improvement Proceedings 59: 7–14.
Martin, J. 2009. Accounting for expenses. The CPA Journal (January): 26–32.
McConnell, D., and G. Banks. 2003. Expanded guidance for auditor fraud detection
responsibilities. The CPA Journal 73 (6): 26–33.
5. How has the auditor’s responsibility for detecting fraud changed since October 2001, when
Niakan was promoted to Director of Asset Management?
Dye, K. M. 2007. Corruption and fraud detection by public sector auditors. EDPACS
(November/December): 6–16.
Güner, M. 2008. Stakeholders’ perceptions and expectations and the evolving role of internal
audit. Internal Auditing 23 (5): 21–33.
Head, S. 2009. Current trends and issues facing internal audit. Internal Auditing 24 (5): 3–8,
10–12, 14–16.
Kujinga, B. T. 2009. Fraud and the auditor. Accountancy SA (July): 24–27.

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Saksena, P. N. 2008. Four tools (under the umbrella of continuous improvement) to help
auditors prevent/detect frauds. Allied Academies International Conference, Academy of
Accounting and Financial Studies Proceedings: 27–31.
Zikmund, P. E. 2008. Reducing the expectation gap. The CPA Journal 78 (6): 20–22, 24–25.
Zikmund, P. E., and M. O’Reilly-Allen. 2007. I’m an auditor, darn it, not an investigator . . .
right? Pennsylvania CPA Journal (Fall): 28–32.
6. Explain the three aspects of the fraud triangle and how these factors enabled fraud to occur at
CIT.
Albrecht, C. 2008. The nature of financial statement fraud. Internal Auditing (July/August):
22–28.
Albrecht, S., C. Albrecht, C. Albrecht, and M. Zimbelman. 2009. Fraud Examination. Third
Edition. Mason, OH: Southwestern.
Brown, A. 2009. Why fraud happens and what to do about it. Accountancy Ireland (February):
30–32.
DeMarco, E. 2009. Fraud and misconduct expected to rise. The RMA Journal (December/
January): 32–37.
Hogan, C.E., Z. Rezaee, R.A. Riley, and U. Velury. 2008. Financial statement fraud: Insights
from the academic literature. Auditing: A Journal of Practice & Theory 27 (November):
231–252.
Wells, J. 1990. Occupational Fraud and Abuse. Austin, TX: Obsidian Publishing Co.
7. What were the red flags that signaled fraud was occurring at CIT? What should auditors, fraud
examiners, and colleagues pay attention to that could be indicative of fraud?
Cezair, J. A. 2009. How internal audit can be effective in combating occupational fraud.
Internal Auditing (May/June): 22–33.
Daigle, R. J. 2009. Stolen without a gun. Journal of Information Systems (Fall): 79–83.
Lojeck, D. 2009. Identity fraud a growing threat to corporations. IOMA’s Report on Managing
Credit, Receivables & Collections (December): 10–12.
McKee, T. A. 2010. The ‘‘cry wolf’’ problem in current fraud auditing standards. The CPA
Journal (January): 60–63.
Martin, A. G. 2006. Gauging business risk. The Internal Auditor 63 (3): 23, 25, 27.
Sanchez, M., K. Brown, and C. Agoglia. 2007. Consideration of control environment and fraud
risk: A set of instructional exercises. Journal of Accounting Education 25 (4) 207–221.
Wells, J. 2009. Practical and ethical considerations in fraud examination. The CPA Journal 79
(6): 56–58.
8. What techniques did Werle use to uncover the fraud? Should she have done anything
differently?
Aldhizer III, G. R. 2009. Fraud and errors: A ticking time bomb that must be defused. The
Journal of Government Financial Management (Winter): 13–20.
Bierstaker, J. L., P. Burnaby, and S. Hass. 2004. Internal auditors’ fraud prevention and
detection methods. Internal Auditing (May/June): 37–41.
Blank, D. 2001. Sweeping audit changes needed to combat financial statement fraud.
Accounting Today (September): 5–7.
DiGabriele, J. 2008. An empirical investigation of the relevant skills of forensic accountants.
Journal of Education for Business 83 (6): 331–338.
Goldon, T., S. Skalak, and M. Clayton. 2006. A Guide to Forensic Accounting Investigation.
First Edition. Hoboken, NJ: John Wiley & Sons, Inc.

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Harding, W. 2006. Data mining is crucial for detecting fraud in audits. Accounting Today
(December/January): 22–24.
Sanchez, M., K. Brown, and C. Agoglia. 2007. Consideration of control environment and fraud
risk: A set of instructional exercises. Journal of Accounting Education 25 (4): 207–221.
9. Explain the professional (AICPA) and regulatory (congressional) actions related to the
auditors’ responsibility for detecting fraud that have occurred since 2000. Consider these
actions in light of the highly publicized frauds that came to light in the early 2000s and the
profession’s and government’s responsibility to the investing public.
Afterman, A. B. 2009. Consideration of fraud in an audit. Accounting and Auditing Update
Service (February): 1–4.
Apostolou, N., and D. L. Crumbley. 2008. Auditors’ responsibilities with respect to fraud: A
possible shift? The CPA Journal 78 (2): 32–34, 36–37.
Dickins, D., and J. L. Higgs. 2009. Bridging the expectations gap. The Journal of Corporate
Accounting & Finance 21 (1): 51–62.
Georgiades, G. 2009. AICPA Proposed Statement on Auditing Standards, Consideration of
Fraud in a Financial Statement Audit (Redrafted). Miller GAAS Update Service (July):
1–9.
Zhang, P. 2007. The impact of the public’s expectations of auditors on audit quality and
auditing standards compliance. Contemporary Accounting Research 24 (2): 631–654.

Evidence of Efficacy
During the fall 2008 term, the case was class-tested in advanced auditing, internal control/
fraud, accounting fraud, and forensic accounting classes. These classes were at both the
undergraduate and graduate levels, and one (internal control/fraud) was taught to nonaccounting,
non-U.S. students in Europe. These classes were taught by two different faculty members.
A key take-away from this testing was to clarify the dates of key events. As a result of the
pretesting, we returned to the original data to verify that all important events were clearly identified.
This resulted in the development of Figure 1. In addition, class discussions in the advanced auditing
class often came back to the accounting profession and changing public perception. For this reason,
question 10 was added and Figure 2 created (both in the teaching notes) to give faculty in all classes
the ability to link the case to changes in the profession.
The feedback received from this phase of pretesting was used to modify the case and develop
the video of the investigators and prosecutor interviews. The case was then class tested again in (1)
the spring of 2009 in an undergraduate auditing class before the video was created, (2) in Europe in
the fall of 2009, with the video, in a class on Internal Control, and (3) in a Graduate Accounting
Fraud class, also with the video, during the fall 2009 term.
The general feedback from the classes was that the case was an interesting example of a real-
world application of accounting fraud and the use of forensic accounting techniques to investigate
fraud. Further, students thought the case helped them better understand the importance of internal
control and how easily it could be circumvented without ongoing monitoring. An undergraduate
systems student commented, ‘‘as a result of the case, I understand the technical terms discussed in
class.’’ One student in the graduate accounting fraud class commented, ‘‘Learning fraudulent
situations helps ID fraudulent behavior and how easily it can occur when controls are in place.’’
Another student in this class commented, ‘‘we tend to focus on controls in the accounting function,
it was helpful to see controls circumvented in another area.’’ One student was in both the
Accounting Fraud and Advanced Auditing classes, and commented that the different questions
helped to tie the case more specifically to each class. Another comment came from one of the

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Volume 26, No. 3, 2011
584 Michelman, Gorman, and Trompeter

international students in Europe who stated, ‘‘The case described real-world people.’’ This
comment, and others like it, indicated that these types of behaviors are not unique to what students
see in their respective cultural behaviors.
The international students had typically taken only 1–2 courses in accounting or management
control, but after 15 hours of discussing the linkages between internal control, corporate
governance, and fraud, they were able to use the fraud triangle as a framework for analysis. The
nationalities of these students are shown in Table 2. Perhaps the most significant comment from an
advanced auditing student was, ‘‘I liked reading the case from Haley’s perspective, because it made
me wonder what I would do if I were in her situation.’’ In particular, students liked the case because
it was about a real situation with real people. Introduction of the video helped to make it even more
real to the students.
A post-case questionnaire (see Appendix B) was used with each class after the completion of the
case, and responses—both qualitative and quantitative—were received from all participants on almost
all of the questions. The response on all questions was quite positive, with the mode being that
participants agreed (4) with the question (see Table 3). The exception was the two graduate classes
that saw the video. The video scores (question 5) were positive, yet this was an earlier version of the
video. The student comments on the video were that it was a good idea and helpful, but the ‘‘sound
quality made it difficult to hear.’’ After these pretests, major portions of the video were reshot.
It is also interesting to note that the lowest scores on the quality of the case were in the Internal
Control, Corporate Governance, and Accounting Fraud class, which was taught in Europe to
students with a limited accounting background (see Table 4). In this course, this case was
juxtaposed against Enron and small business cases. Student feedback included comments, ‘‘It shows
a type of fraud that occurs when there actually is internal control, by circumventing it, so it is
something we had not seen before. The videos of law enforcement members were also very useful.’’

TABLE 2
Class-Testing for Efficacy
Number of Students
Course (University, Instructor) Participating Type of Students
Auditing (School A, Instructor X) 29 (Undergraduate)
Accounting Information Systems (School B, Instructor Y) 29 (Undergraduate)
Advanced Accounting Information Systems (School B, 13 (Graduate)
Instructor Y)
Introduction of Video
Accounting Fraud (School B, Instructor Z) 13 (Graduate)
Internal Control, Corporate Governance & Accounting Fraud 35 (Graduate)
(School C, Instructor Z)
Spain 42.86%
Poland 28.57%
South Korea 8.57%
Belgium 2.86%
Italy 2.86%
Taiwan 2.86%
Turkey 2.86%
USA 2.86%
Total 61 (Graduate)
58 (Undergraduate)
119

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Accounting Fraud at CIT Computer Leasing Group, Inc. 585

TABLE 3
Ratio Analysis of Questions about ‘‘Accounting Fraud at CIT Computer Leasing Group,
Inc.’’a
Question Strongly Disagree Disagree Neutral Agree Strongly Agree
1 10 78 31
2 1 1 17 77 23
3 1 2 24 62 29
4 1 12 56 47
5b 10 13 12 12
6 1 2 24 63 24
a
The number of student responses was 119 for questions 1–4 and 6, and 47 for question 5, where numbers less than 119
and 48, respectively, represent answers that were left blank.
b
The first draft of the video was shown to students by Professor Z at schools B and C, which served as the basis for a
major revision of the video.

TABLE 4
Mean Scores of Questions about ‘‘Fraud at CIT Computer Leasing Group, Inc.’’
Advanced Internal
Accounting Accounting Control, Corporate
Information Information Accounting Governance &
Auditing Systems Systems Fraud Accounting Fraud Overall
Question (n = 29) (n = 29) (n = 13) (n = 13) (n = 35) (n = 119)
1 4.31 4.31 4.25 4.15 3.94 4.18
2 3.97 3.97 4.23 4.23 3.91 4.01
3 4.18 4.04 3.92 4.15 3.80 4.00
4 4.29 4.46 4.38 4.23 4.09 4.27
5 NA NA NA 3.42 3.60 3.55
6 4.29 4.00 4.08 4.09 3.59 3.96

These students, in particular, were able to better understand the importance of internal control,
which many had been exposed to for the first time during this class. These students also commented
that the video helped them to better understand the role of law enforcement in both the completion
of forensic analysis and prosecution of offenders.

TEACHING NOTES
Teaching Notes are available only to full-member subscribers to Issues in Accounting
Education through the American Accounting Association’s electronic publications system at http://
[Link]/ Full-member subscribers should use their usernames and passwords for entry into the
system where the Teaching Notes can be reviewed and printed. Please do not make the Teaching
Notes available to students or post them on websites.
If you are a full member of AAA with a subscription to Issues in Accounting Education and
have any trouble accessing this material, then please contact the AAA headquarters office at info@
[Link] or (941) 921-7747.

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586 Michelman, Gorman, and Trompeter

REFERENCES
Albrecht, S., C. Albrecht, C. Albrecht, and M. Zimbelman. 2009. Fraud Examination. Third Edition.
Mason, OH: Southwestern.
Bloom, B., J. Hastings, and G. Madaus. 1971. Handbook of Formative and Summative Evaluation of
Student Learning. New York, NY: McGraw-Hill.
Boatman, K., R. Courtney, and W. Lee. 2008. See how they learn: The impact of learning styles on student
performance in introductory economics. The American Economist (Spring): 39–48.
Hogan, C., Z. Rezaee, R. Riley, and U. Velury. 2008. Financial statement fraud: Insights from the academic
literature. Auditing: A Journal of Practice & Theory 27 (November): 231–252.
Mayer, R. E. 2003. Three facets of visual and verbal learners: Cognitive ability, cognitive style, and
learning preference. Journal of Educational Psychology 95 (4): 833–846.
Naumes, W., and M. Naumes. 2006. The Art and Craft of Case Writing. Second Edition. Armonk, NY:
M.E. Sharpe.
Pashler, H. 2009. Learning styles: Concepts and evidence. Psychological Science in the Public Interest 9
(3): 105–119.
Spector, M., V. O’Connell, and K. Haywood. 2009. CIT files its bankruptcy plan. The Wall Street Journal.
Available at: [Link]
Stokes, S. 2002. Visual literacy in teaching and learning: A literature perspective. Electronic Journal for the
Integration of Technology in Education 1 (1): 10–19.
U.S. House of Representatives. 2002. The Sarbanes-Oxley Act of 2002. Public Law 107-204 [H. R. 3763].
Washington, D.C.: Government Printing Office.

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 APPENDIX A
Summary Schedule of Fraud Cases that have Appeared in Issues in Accounting Education in Recent Years.
Case Title/Authors Date/Pages Classes Industry Nature of Fraud Key Take-Aways
Vinand Petroleum, Inc.: Initial May 2010/ Auditing Oil and gas Fraudulent contracting process Applying professional
Audit Engagement and pp. 331–346 industry and whistleblowers. standards to the evaluation
Fraud Risk Case for a of audit risk, fraud risk, and
Specialized Industry client acceptance issues on a

Volume 26, No. 3, 2011

By Vincent Owhoso and new client engagement.
Andrea Weickgenannt

Issues in Accounting Education

Return of the Tallahassee Bean May 2010/ All accounting/ Minor league Whistleblowers. Money doesn’t Analyze the financial and
Counters: A Case in pp. 279–321 auditing baseball team add up or balance. background data provided,
Forensic Accounting brainstorm the possible ways
By Carol Callaway Dee and in which a fraud could be
Cindy Durtschi perpetrated and concealed
within the organization, and
determine the additional
information you need to
confirm or disprove your
suspicions.
Accounting Fraud at CIT Computer Leasing Group, Inc.

Using Queries to Automate February 2010/ Querying Privately held Develop technical querying
Journal Entry Tests: Agile pp. 155–174 techniques company skills and foster small group
Machinery Group, Inc. teamwork.
By Tina M. Loraas and
DeWayne L. Searcy
The Violet Bay School District February 2010/ Internal School district Unrealistic assumptions were Better understanding of the
Deficit of 2005: Evaluating pp. 119–153 control deficit used in preparation of the importance of internal
Internal Control and operating budget. The control, understanding of an
Identifying Risks School Board budget was entity and identifying its
By Laurie J. Henry, Michael not used to evaluate or business risks, evaluation of
E. Bitter, and Terry monitor actual results. internal control using the
Kubichan five components of the
COSO framework,
identification of fraud
indicators, and consideration
of the likelihood of fraud
occurrence.
587

(continued on next page)

 APPENDIX A (continued)
588

Case Title/Authors Date/Pages Classes Industry Nature of Fraud Key Take-Aways

Maxwell and Company: Staff May 2008/ Internal Internal One of its employees has been Importance of quality control at
Auditor Embezzlement at a pp. 291–297 controls accounting embezzling funds from a accounting firms, and their
Small Client firm client. responsibilities.
By Constance A. McKnight,
Tracy S. Manly, and Pamela
S. Carr
Helecom Communications: February 2005/ Fraud risk Public company Exposure to key aspects of
Considering Fraud Risk on pp. 99–118 assessment in the cable SAS No. 99 and auditing
an Engagement before and or assurance industry approaches used by
after Analyzing a Key international accounting
Business Process firms, as well as each
By Brian Ballou and element of the fraud triangle.
Jennifer M. Mueller
Interstate Business College: A November 2004/ All accounting Higher Failure to file/pay state taxes, Fraud examinations skills,
Case Study in Fraud pp. 505–527 students education loan fraud, illegal transfers, document examination,
Examination grand theft, and searching public records,
By Bonita K. Peterson and embezzlement. financial statement analysis,
Thomas A. Buckhoff communicating the result of
your work.
Dickinson Technologies, Inc.: February 2003/ All accounting/ Technology Perform realistic audit tasks
Assessing Control pp. 71–78 auditing corporation using evidence obtained
Environment and Fraud Risk from an actual company.
By Christopher P. Agoglia,
Kevin F. Brown, and Dennis
M. Hanno
Comptronix, Inc.: An Audit February 2000/ Auditing High technology Manipulating accounting Identify audit procedures that
Case Involving Fraud pp. 105–128 company records to overstate earnings would have detected the
By James L. Boockholdt from 1989–1991. fraud and suggest conditions
that should have alerted the
auditor.
(continued on next page)

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Michelman, Gorman, and Trompeter

Issues in Accounting Education

 APPENDIX A (continued)
Case Title/Authors Date/Pages Classes Industry Nature of Fraud Key Take-Aways

Brodnax Minerals Company: A November 1999/ Auditing Minerals/mining Misleading material statements. The objectives and limitations
Case Study on Auditors’ pp. 589–612 company of an audit, issues involving
Responsibilities client acceptance and risk to
By John T. Reisch the auditing firm, the
rendering of appropriate

Volume 26, No. 3, 2011

audit opinions, and the
auditors’ responsibilities for
the detection of fraud.

Issues in Accounting Education

Fraud Detection and February 1999/ All accounting/ Micro-computer Inventory fraud was committed Recognizing red flags
Investigation: Microcomputer pp. 99–115 auditing consulting by the department seeing indicative of fraud, the
Consulting Services service that they could not account importance of a good system
By Bonita K. Peterson and in full for purchases ordered of internal controls, and the
Thomas H. Gibson by the MCS. Also, orders profile of the typical fraud
that had been purchased and perpetrator.
paid for were not in the
custody of the MCS.
Instructional Case: Lakeview August 1999/ All accounting Lumber industry Manipulating net income in Interpretation and application
Accounting Fraud at CIT Computer Leasing Group, Inc.

Lumber, Inc.: A Study of pp. 497–515 students response to a bonus of professional standards,
Auditing Issues Related to compensation scheme. perform analytical review,
Fraud, Materiality and prepare common-size
Professional Judgment statements, and use the
By Deborah L. Lindberg internet to find
pronouncements and
financial information.
Embezzlement at the November 1998/ Govt./advanced University Employee fraud by creating Consideration of fraud in a
University of California: An pp. 975–984 auditing fictitious claims against financial statement audit,
Instructional Case in nonexistent university internal control structure,
Employee Fraud employees. audit materiality, and the
By Peggy D. Dwyer design of substantive audit
tests.
589
590 Michelman, Gorman, and Trompeter

APPENDIX B

Questions about ‘‘Accounting Fraud at CIT Computer Leasing Group, Inc.’’

Accounting Fraud at CIT Computer Leasing Group, Inc.
Case Evaluation Feedback Form
Fall 2009
Accounting Fraud

This information will be provided to the case’s authors.

Therefore, honest answers are most important.

1. Did you like the case? Why or why not?

2. It was well written?

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5. There were important accounting and auditing issues to examine?

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5a. Please list three important accounting/auditing issues.

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6. I felt the videos were helpful in better understanding the issues in the case and how it was
investigated:
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Accounting Fraud at CIT Computer Leasing Group, Inc. 591

7. I had enough information to answer the questions?

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8. How could the case have been improved?

9. Did you find the questions helpful in getting you to understand the issues in the case?

10. Was the case relevant to what you were discussing in class? Why or why not?

11. What country are you from? ______________________________

12. What year are you in your University?

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