1. What constitutes a fraud, and is the withholding problem a fraud?

Fraud is a false representation of a matter of factwhether by words or by conduct,

by false or misleading allegations, or by concealment of what should have been disclosed
that deceives and is intended to deceive another so that the individual will act upon it to her
or his legal injury. Given this definition, the withholding problem is a fraud issue. It is
because there was intent to deliberately deceive others up until the fraud was discovered.
There have been manipulations on payroll data to compromise others and putting all those
accumulated $5 into one account.

2. If this is indeed a fraud, how was it perpetuated? What motivated Don to commit it?

As a payroll programmer, the fraud was easily perpetuated by manipulations or

alterations on the design of the payroll system. Having the capacity doing such act, Don was
able to transfer immaterial amounts from other employees to his payroll account. The
system that the company used to determine the net pay to give out to its employees was
compromised. Just like in the fraud triangle, Don had the opportunity to alter the design
because of his authority and knowledge as a programmer. He was also pressured to commit
such act because of the financial returns of withholding issue and there was personal
justification that maybe no one will detect such act because immaterial amounts were
involved.

3. Why did the company not catch these mistakes earlier? Was there a breakdown in
controls?

The company was not able to detect such fraud because the defect or error was on
the design of the payroll system itself. Further, the amounts taken from other employees
were immaterial that the chance of it being detected was slim. Definitely, there was a
breakdown in controls because one programmer was able to compromise the payroll system
and was not discovered immediately. No segregation of tasks was implemented that
incompatible duties were given to one person, just like in the case of Don. Moreover, there
was no alarm or notification to the IT department when a suspicious alteration was being
made.