UNIVERSITY OF SOUTH AFRICA
College of Accounting Sciences — Department of Auditing
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
AUE4863: Financial Fraud Schemes
Assignment 02 — Semester 1, 2026
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
AUE4863
Module Code:
Financial Fraud Schemes
Module Name:
Assignment 02
Assignment:
597318
Unique Number:
29 June 2026
Due Date:
100
Total Marks:
Department of Auditing
Department:
Submitted in partial fulfilment of the requirements for AUE4863 — UNISA 2026
,UNISA | AUE4863 Financial Fraud Schemes — Assignment 02
Question 1: Inventory and Asset Misappropriation Schemes at La Batho (25 Marks)
Question: Identify and critically discuss four (4) different schemes through which raw materi-
als and finished goods could be misappropriated at La Batho Agri Processing (Pty) Ltd.
Asset misappropriation is the most prevalent form of occupational fraud, accounting for ap-
proximately 89% of all reported occupational fraud cases globally (ACFE, 2024). At La Batho
Agri Processing (Pty) Ltd, the decentralised structure across four production and storage
hubs, combined with large volumes of raw materials and finished goods crossing provincial and
international borders, creates significant exposure to inventory theft and misappropriation.
Four distinct misappropriation schemes are identified and discussed below.
1.1 Theft of Inventory (Direct Inventory Larceny)
Inventory larceny involves the direct, physical theft of raw materials or finished goods from
a company’s premises without any concealment through falsified records (ACCA, 2024). At
La Batho, employees at the Mbombela, Mooketsi, Botshabelo or Mafikeng hubs could remove
maize meal, sorghum, cooking oil, or canned vegetables from storage facilities without authori-
sation. Given the large volumes moving between hubs and to neighbouring countries such as
Lesotho, Eswatini and Mozambique, individual instances of theft may go undetected, particu-
larly during busy dispatch periods.
The scheme is enabled by the decentralised nature of operations. When physical security con-
trols such as access restrictions, CCTV surveillance and guard patrols are weak or inconsis-
tently applied across all four hubs, perpetrators exploit the gaps. For instance, a warehouse
employee at the Mafikeng hub could remove bags of peanut butter or cans of vegetables dur-
ing night shifts when supervision is minimal, loading them into personal vehicles.
The theft is often concealed by manipulating physical stock counts; if the employee is responsi-
ble for conducting or certifying stock counts, shortages may be masked by recording fictitious
adjustments attributed to spillage, breakage or natural wastage. The internal audit depart-
ment led by Mathapelo Masemola has already uncovered unexplained shortages, which are
consistent with this pattern of misappropriation.
Page 2 of 17
, UNISA | AUE4863 Financial Fraud Schemes — Assignment 02
Critical Consideration
Critical Consideration: Where an employee performing the theft also controls the
physical stock count or reconciliation records, a critical separation of duties weakness
exists. This concentration of control significantly increases the risk that theft will go
undetected for extended periods (Duja Consulting, 2025).
1.2 Fictitious Shipments and False Documentation Scheme
This scheme involves the creation of fraudulent delivery, dispatch or transfer documentation
to justify the movement of inventory out of La Batho’s control, while concealing the fact that
goods were diverted for personal gain (StoneTurn, 2022). Perpetrators may create fictitious de-
livery orders purporting to show that raw materials were dispatched to a legitimate customer
such as a school or NGO in Mozambique, when in fact the goods were diverted to an external
party willing to purchase stolen stock.
At La Batho, the cross-border nature of deliveries to Lesotho, Eswatini and Mozambique
makes this scheme particularly effective. Cross-border logistics involve multiple documentation
steps, including packing lists, border crossing declarations and delivery confirmation notes. A
logistics coordinator or warehouse manager could create a false dispatch note for a consign-
ment of maize meal ostensibly destined for a school in Eswatini, divert the actual goods to an
informal buyer, and file the forged delivery confirmation as evidence of legitimate delivery.
Detection is further hindered because the volume of cross-border transactions makes individ-
ual verification difficult. Recipients of the goods such as schools or NGOs are often in remote
areas, and follow-up confirmation from them may be infrequent or informally conducted.
Key Distinction
Key Distinction: Fictitious shipment fraud differs from direct inventory larceny
in that it creates a paper trail to justify the disappearance of goods. The fraud is
therefore embedded within the documentation system rather than being a simple phys-
ical removal, requiring the forensic auditor to trace documentation back to delivery
confirmation rather than relying only on physical stock counts.
Page 3 of 17
College of Accounting Sciences — Department of Auditing
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
AUE4863: Financial Fraud Schemes
Assignment 02 — Semester 1, 2026
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
AUE4863
Module Code:
Financial Fraud Schemes
Module Name:
Assignment 02
Assignment:
597318
Unique Number:
29 June 2026
Due Date:
100
Total Marks:
Department of Auditing
Department:
Submitted in partial fulfilment of the requirements for AUE4863 — UNISA 2026
,UNISA | AUE4863 Financial Fraud Schemes — Assignment 02
Question 1: Inventory and Asset Misappropriation Schemes at La Batho (25 Marks)
Question: Identify and critically discuss four (4) different schemes through which raw materi-
als and finished goods could be misappropriated at La Batho Agri Processing (Pty) Ltd.
Asset misappropriation is the most prevalent form of occupational fraud, accounting for ap-
proximately 89% of all reported occupational fraud cases globally (ACFE, 2024). At La Batho
Agri Processing (Pty) Ltd, the decentralised structure across four production and storage
hubs, combined with large volumes of raw materials and finished goods crossing provincial and
international borders, creates significant exposure to inventory theft and misappropriation.
Four distinct misappropriation schemes are identified and discussed below.
1.1 Theft of Inventory (Direct Inventory Larceny)
Inventory larceny involves the direct, physical theft of raw materials or finished goods from
a company’s premises without any concealment through falsified records (ACCA, 2024). At
La Batho, employees at the Mbombela, Mooketsi, Botshabelo or Mafikeng hubs could remove
maize meal, sorghum, cooking oil, or canned vegetables from storage facilities without authori-
sation. Given the large volumes moving between hubs and to neighbouring countries such as
Lesotho, Eswatini and Mozambique, individual instances of theft may go undetected, particu-
larly during busy dispatch periods.
The scheme is enabled by the decentralised nature of operations. When physical security con-
trols such as access restrictions, CCTV surveillance and guard patrols are weak or inconsis-
tently applied across all four hubs, perpetrators exploit the gaps. For instance, a warehouse
employee at the Mafikeng hub could remove bags of peanut butter or cans of vegetables dur-
ing night shifts when supervision is minimal, loading them into personal vehicles.
The theft is often concealed by manipulating physical stock counts; if the employee is responsi-
ble for conducting or certifying stock counts, shortages may be masked by recording fictitious
adjustments attributed to spillage, breakage or natural wastage. The internal audit depart-
ment led by Mathapelo Masemola has already uncovered unexplained shortages, which are
consistent with this pattern of misappropriation.
Page 2 of 17
, UNISA | AUE4863 Financial Fraud Schemes — Assignment 02
Critical Consideration
Critical Consideration: Where an employee performing the theft also controls the
physical stock count or reconciliation records, a critical separation of duties weakness
exists. This concentration of control significantly increases the risk that theft will go
undetected for extended periods (Duja Consulting, 2025).
1.2 Fictitious Shipments and False Documentation Scheme
This scheme involves the creation of fraudulent delivery, dispatch or transfer documentation
to justify the movement of inventory out of La Batho’s control, while concealing the fact that
goods were diverted for personal gain (StoneTurn, 2022). Perpetrators may create fictitious de-
livery orders purporting to show that raw materials were dispatched to a legitimate customer
such as a school or NGO in Mozambique, when in fact the goods were diverted to an external
party willing to purchase stolen stock.
At La Batho, the cross-border nature of deliveries to Lesotho, Eswatini and Mozambique
makes this scheme particularly effective. Cross-border logistics involve multiple documentation
steps, including packing lists, border crossing declarations and delivery confirmation notes. A
logistics coordinator or warehouse manager could create a false dispatch note for a consign-
ment of maize meal ostensibly destined for a school in Eswatini, divert the actual goods to an
informal buyer, and file the forged delivery confirmation as evidence of legitimate delivery.
Detection is further hindered because the volume of cross-border transactions makes individ-
ual verification difficult. Recipients of the goods such as schools or NGOs are often in remote
areas, and follow-up confirmation from them may be infrequent or informally conducted.
Key Distinction
Key Distinction: Fictitious shipment fraud differs from direct inventory larceny
in that it creates a paper trail to justify the disappearance of goods. The fraud is
therefore embedded within the documentation system rather than being a simple phys-
ical removal, requiring the forensic auditor to trace documentation back to delivery
confirmation rather than relying only on physical stock counts.
Page 3 of 17
