This week's discussion is based on the documentary, All the Queen's Horses. The documentary is available on Netflix. Please watch the video and also review the related resources listed below.
All the Queen’s Horses
On February 14, 2013, Rita Crundwell, former comptroller for the city of Dixon, IL was sentenced to 19½ years in prison for stealing more than $53 million from Dixon. Crundwell's crime went on record as the largest municipal fraud in U.S. history. Just as shocking as the amount stolen from this small Illinois town, was the fact that Crundwell engaged in her scheme to pillage Dixon for 20 years before being discovered.
Crundwell's fraud shines an unflattering spotlight on the accounting profession and the role of the audit. The relevance of the audit has been in question since the uncovering of massive corporate frauds dating back to Worldcom and Enron. Subsequent to Crundwell's conviction, the city of Dixon sued its auditors, accountants and bank, settling their claim against them for $40 million.
After viewing the video and reviewing the related resources, please submit a 3-4 paragraph initial post, addressing the following:
- Describe the fraud scheme committed by Rita Crundwell, including how she concealed the fraud.
- How did Rita Crundwell steal over $37,000 each day from a town with an annual budget of around $6 million?
- Discuss the application of the fraud triangle and other fraud theories we have covered as they apply to this case study.
- How could this fraud have been prevented? In your discussion, be sure to explain the controls that were missing at City Hall.
- How could such embezzlement go undetected in annual audits by two independent accounting firms and in annual audit reviews by state regulators? How was this fraud continued for so many years? What red flags did the auditors miss?
- How did residents not become suspicious of Crundwell’s extravagant wealth and frivolous spending?
- How was the fraud finally detected? Explain the legal side of the case.
Explanation & Answer
Running Head: DOCUMENTARY
All the Queen's Horses
Describe the fraud scheme committed by Rita Crundwell
Rita being the treasurer and controller of a city, Dixon managed to embezzle around 53.7 million
dollars, an embezzlement which is believed to be the largest in the US. Dixon did not have a full
accountant but only a part time one. An accounting firm therefore, handled the payroll, the
paying of the bills of the city as well as financial auditing (All the Queen's Horses. 2017).
How Rita committed the fraud
In the given case, fraud was committed in many different ways. Rita Crundwell first committed
fraud in the way she used the city finances. The finances were meant for red lights, construction
and road work. Rita came up with a fake account which she called the Reserve Sewer Capital
Development Account. She transferred the city funds into the bogus account for false bills as
well as invoices. She did this because she wanted to embezzle the finances. Rita used this
account for personal use. Also, the fraud was committed because of the absence of internal
controls (All the Queen's Horses. 2017 TV-14). Rita had control both over the signing of checks
and creating documents tha...
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