Jonas Fritz, owner of Careful Construction Inc., had a perplexing problem. Although his company always had enough work to keep the employees busy,…

Jonas Fritz, owner of Careful Construction Inc., had a perplexing problem. Although his company always had enough work to keep the employees busy,…. Jonas Fritz, owner of Careful Construction Inc., had a perplexing problem. Although his company always had enough work to keep the employees busy, company profits were falling. In fact, Careful Construction Inc. will have difficulty meeting its payroll this year. Mr. Fritz compared Careful Construction Inc.’s materials costs with the company’s overall revenues for the past 3 years, and he noticed that materials costs were rising at a significantly greater pace than were revenues. Mr. Fritz could not understand why materials costs were rising so rapidly, especially since his other costs were remaining relatively constant. Mr. Fritz showed these results to his friend, Larry “Calculator” Mason, who had conveniently just taken a continuing education course in fraud recognition and prosecution.

Jonas Fritz, owner of Careful Construction Inc., had a perplexing problem. Although his company always had enough work to keep the employees busy,…