Question

You were provided with an article in the Chapter 6 materials that told the story about Rita Crundwell, the former Comptroller of Dixon, Illinois. Rita stole $54 million from the municipality during her twenty years of employment with the city. It was the largest municipal fraud in U.S. history, and went undetected for so long because the city had weak internal controls over financial accounting.

The fraud occurred because internal controls were lacking, and because city officials and auditors executed poor oversight. Which of the following was NOT a red flag that the city could be a victim of fraud

A) When city officials asked questions about the financial shortfalls that occurred year after year, Rita responded with believable excuses. City officials trusted her, and did not independently verify her story.
B) Rita led a lavish lifestyle, and appeared to be wildly successful, even though her salary was only $80,000. She owned several homes, and had 400 horses. It was rumored that her family was very wealthy.
C) Rita was "sweet as pie," and if something needed to get done, she’d do it.
D) Rita was able to receive, sign and deposit checks. She also prepared the bank reconciliations and was authorized to transfer money between accounts.

Answer 1

C) Rita was "sweet as pie," and if something needed to get done, she’d do it.

Step-by-step explanation:

Rita being sweet as a pie and doing whatever was given to her does not have anything to do with the effectiveness of the Internal control mechanism in place.

Other elements mentioned here must act as a RED FLAG that the city could be a victim of fraud.

hence, option c is the correct answer