...companies used to protect themselves such as: Segregation of duties, asset purchases, supervisor review, internal audits and adequate documents and records. This paper will discuss several topics from a case study about And the Fraud Continues; it’s basically about a Fraud case with MCI. The following questions will be answered below 1) Discuss the internal control weaknesses that existed at MCI that contributed to the commission of this fraud, 2) Identify and justify the approach you would take if you suspected fraudulent activity within an organization where you work, 3) Critique the ethical nature of Pavlo’s actions in the case and 4) Apply one (1) theory related to crime causation to this case. The internal control weakness that exists at MCI was Pavlo; he was able to manipulate the AR (Accounts Receivable) system because he was the creator and developer. The lack of segregation of duties takes please here because the same employee is able to receive payments, update accounts receivable records and/or reconcile the company’s bank account. This gives the opportunity to be able to embezzle money from the company (http://smallbusiness.chron.com/strengths-weakensses-accounts-receivable-35111.html). Pavlo performed fraudulent activities at MCI by doing the following: 1. Identifying Accounts receivables as write off and converted them into notes receivables so that expenses are not touched and an Asset is credited in the balance sheet. 2. Unapplied cash was...
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...Case Study 1: And the Fraud Continues Forensic Accounting July 22, 2012 Abstract This case represents features of organized crime, occupational fraud and abuse. Most of these crimes involve many individuals and organizations as well as management and/or co-workers that are in a lot of social and financial pressures. Some of the crimes related with organize crime will be money laundering, mail and wire fraud, conspiracy and racketeering. With an internal control weakness employees would always look for opportunities to commit fraud or use company assets without permission. Within this case, we will see multiples internal control weaknesses that allowed Pavlo to perpetrate the fraud and how he used the tricks to mask the whole scam. We also are going to think on what was Wanserski position when Pavlo was performing the fraud. We will explore the investigation process and what type of procedures the auditor/investigator needs to follow in order to gather all the evidence. We will have the opportunity as readers to determine if MCI also had a fault by permitting or putting the pressure on his employees to comply with some guidelines instead of looking for ways to help employees to improve their work areas. Internal control is the method intended to ensure dependable financial reporting, effective and efficient department operations, and business compliance with related laws and regulations. Not having an effective internal control process will allow fraudsters like...
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...Continues 1 And The Fraud Continues Andrea Williams-Weston Strayer University ACC571 Dr. Dushyant Gosai July 22, 2012 Continues 2 Walt Pavlov’s Background Pavlo received his engineering degree from West Virginia University and an MBA from Mercer University in Atlanta. He began working as a financial analyst at Goodyear Aerospace and later worked as a contract manager at GED-Ltd, before joining MCI in 1992. During his employment at MCI, Pavlo worked in the carrier’s financial unit and was one of the group managers responsible for billing and collections for the carrier business segment. “In 1996, Pavlo began to perpetrate a fraud involving several MCI customers. When the scheme was completed; seven MCI customers had been defrauded over a six-month period, resulting in $6 million being funneled to the Cayman Islands. In January 2001, Walt Pavlo pleaded guilty to wire fraud and money laundering and was sentenced to a 49-month prison sentence. He entered a federal prison shortly thereafter,” (Kranacher, Riley, & Wells, 2009). 1. Discuss the internal control weaknesses that existed at MCI that contributed to the commission of this fraud. Walt Pavlo was responsible for billing and collections of nearly $1 billion in monthly revenue for MCI’s carrier finance...
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...T ackling Fraud, Waste, and Abuse in the M edicare and Medicaid Programs: R esponse to the May 2 Open Letter to the Healthcare Community Dan Olson, CFE June 2012 Tackling Fraud, Waste, and Abuse in the Medicare and Medicaid Programs White Paper C ontents I. Introduction ............................................................................................................ 1 II. Recommendations................................................................................................... 3 Recommendation 1 – Expand the Medicare Fraud Strike Force Model....................................... 3 Potential Savings .......................................................................................................................... 4 Recommendation 2 – Expand Integrated Data Repository .......................................................... 4 Potential Savings .......................................................................................................................... 5 Recommendation 3 – Expand “Do Not Pay List” .......................................................................... 5 Potential Savings .......................................................................................................................... 6 Recommendation 4 – Publicize Drug Expiration Dates ................................................................ 6 Potential Savings ....................................................................
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...Accounting 1 Ms. Harrington 2/22/12 Financial fraud was a word rarely herd of before the 2000’s, but as the economy got worse and worse it became a leading headline. Americans began to find out that some of America top companies had been intentionally altering their accounting books to appear stable. Some of these companies were taking the money for personal use and some to convince people to still invest with them. As well as top company’s being fraudulent there were new highs hit as banks had the highest totals ever for fraudulent checks. Also spikes in identity theft and credit fraud. This should be no surprise since the economy started down sliding in 2001and times have gotten harder on every one. It is easy to commit financial fraud in the use. With the biggest motivation being that people can think they can get away with it. A wise teacher once said, a good accountant can make the numbers balance one way or another. This is the case, therefor it has become too easy and to tempting for some people. That explains the harsh prison sentences and threats of hefty charges for fooling around with finical fraud. One way or another the law takes down people who go after the quick buck. Whether it’s a minor check fraud scam or million dollars in fake expenses the law always wins. Finical fraud is every were and as an American citizen it is important to understand finical fraud, examples of finical fraud and how to protect and ovoid finical fraud. What is financial fraud? Financial...
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...Case Study 1 – And the Fraud Continues Heidi Janis Casazza Strayer University ACC/571 Dr. Timothy Franklin Deleanor Brown January 27, 2013 Case Study 1 – And the Fraud Continues Since the turn of the century, many financial scandals have been discovered, such as MCI Communications Corporation (MCI). Financial scandals can be minimized by the use of effective internal controls. According to Chao and Foote, effective internal controls reasonably prevent material misstatements in financial reporting and fraud while weak internal controls have the opposite effect (2012). Extensive research about the MCI’s financial scandal has provided proof that Chao and Foote’s analogy of internal controls is correct. Ultimately, the problems MCI had were caused by a weakness in internal controls, which causes MCI to be a prime example of how weak internal controls can be disastrous and lead to the bankruptcy of a company. The Situation That Led to MCI’s Downfall MCI Communications Corporation (MCI) was a communication company that primarily dealt with resellers, which means MCI would sell or lease time to other communication carriers who in turn resold the time to other businesses and consumers. According to Lyon and Tocco (2007), MCI’s revenue grew from about $240 million to about $650 million a month in account receivables. In addition, the growth in revenue caused the bad debt percentage to increase significantly in 1995 along with a significant increase in accounts receivable...
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...Case 5-1 David L. Miller: Portrait of a White-Collar Criminal 1. How does Miller fit the profile of the average fraud perpetrator? David Miller looks just like a normal employee and that is the main reason he would fit right into the profile of that of the average fraud perpetrator. Those who are usually while collar workers do look like most in the world of business, and thus making them even more of a perpetrator in some cases. These type of workers do work long hours and most of the time it is because they are committing the fraud or trying to hide it. They work long hours and never take vacation but they are most likely working on the constant struggle to conceal their fraud. How does he differ? Miller differed from the profile of the average fraud perpetrator because he assured the companies he did fraud with in the beginning and took fault for his actions. Miller also said he would pay back the money he had stolen. The company gave Miller a chance and he did make good on his promise. The down side is that he may be frauding other companies to pay back the first company his frauded. How did these characteristics make him difficult to detect? These characteristics made it difficult to detect Miller because his white collar criminal image was so identical to that of the general public, and he was trusted and liked by all of his employers. Since he works inside the company, he is aware of the company’s system and weakness. And with this, he managed to exploit...
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...Journal of Forensic & Investigative Accounting Vol. 4, Issue 2, 2012 The Obvious Fraud: A Short, Problem-Based Case Study to Highlight Inappropriate Fraud Examination Techniques David O’Bryan Jeffrey J. Quirin* INTRODUCTION Assume you are an internal auditor for a large, multinational, manufacturing organization with a division in Mexico. One of your responsibilities is to investigate allegations made on the company’s fraud hotline. When you arrive at work one morning you learn an anonymous tip was left on the hotline that alleges fraud involving the division manager. “Pat’s significant other is a fraudulent vendor,” was the anonymous tip left on your company’s fraud hotline. Pat is a division manager at your company. “Wow. I can’t believe this guy is so blatant,” you’re thinking as you review some accounts payable invoices while following up on this anonymous tip. The invoice that caught your attention is shown in Table 1. A quick search of the AP file reveals a total of three invoices like the one in Table 1, all for identical amounts but on different dates. The division manager, Pat, has the authority to approve payment of invoices for less than $10,000. It is obvious to you that the manager has a created a shell company. You happen to know that Pat’s significant other is named Kim, hence the name Kimco Marketing. There is no documentation to support these transactions other than the invoices, all of which are purportedly for marketing services. * The authors are, respectively...
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...Case 1: The Fraud Continues July 17, 2011 Abstract Focusing on the internal control weaknesses that existed at MCI, which contributed to the commission of Walt Pavlo’s famous multi-million dollar fraud. Discussing the approach that should have been taken if fraud was suspected and applying one theory related to crime causation of this case. As well as critiquing the ethical behavior of Pavlo and MCI – discussing what actions could have been taken to prevent the crime. 1. Discuss the internal control weaknesses that existed at MCI that contributed to the commission of this fraud. When we listen to Pavlo and outside sources, like ethics professor Stephen Henn in his book “Business Ethics,” we hear of employees concealing bad debt in Pavlo’s department. It seems that “unethical decisions were commonplace” (Henn 2009). We see an upper management that, when notified of large amounts of bad debt, completely denied any problem. Pavlo states, “I sent a memo to senior staff telling them that we had about $180 million of bad debt…. and asking how we were going to address it…The response was that the bad debt budget…was going to remain at $15 million and that we would just have to work through whatever issues we had.” (Jacka 2004) An ‘Internal Auditor” article from 2004 goes on to report that in one account “a customer who owed MCI US $100 million was allowed to sign a promissory note, which turned the receivable into a short-term asset.” These examples are perhaps the most...
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...Forensic Accounting 1 Assignment 3: Forensic Accounting in Practice BUS 508 Professor: Edwin Quinn Jr. Carmesha Eldridge May 19, 2013 Forensic Accounting 2 1. Determine the most important five (5) skills that a forensic accountant needs to possess and evaluate the need for each skill. Be sure to include discussion regarding the relationship between the skill and its application to business operations. One of the most essential skills is being analytical. Forensic accountants must make sure that they are in a position to uncover financial deceptions by critically analyzing them with an understanding of fraud schemes. A forensic accountant is deductive analysis or the ability to take a shot at the financial contradictions that are not a normal pattern of the company to uncover potential financial fraud. Being analytical is essential to remaining an effective forensic accountant. They need to be able to analyze the validity of each transaction the company recorded to make sure that the transactions were reported accurately and fairly. They must possess the knowledge and expertise to interpret financial statements or work under situations where information has been either destroyed or tampered with and be analytical and put the pieces of the puzzle back together again. Forensic accountants should be detailed orientated. Being a forensic accountant means that you will be looking at large quantities of numbers from supporting documents and various financial reports...
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...Introduction This is a complex fraud and financial crime that has an element of collusion. The collusion is among individuals, Walt Palvo and his cohorts, within the organization. It is a fraud that involves a controller or sophisticated participant within the organization’s financial reporting structure. Palvo worked at MCI in the carrier’s financial unit and was one of a group of managers responsible for billing and collections for the carrier business segment. This is an organized crime and to a greater extent, a white collar crime, comprised of respected, business and professional men. These executive level individuals worked in concert (collusively) to override the system of internal controls through the sophisticated use of journal entries, other financial reporting choices and through material and unusual transactions. Due to the unique nature of this type of fraud, large dollars are involved and the damage can be devastating. 1. Discuss the internal control weaknesses that existed at MCI that contributed to the commission of this fraud. When complex fraud and financial crimes are involved, as in the case of MCI, the first thing that comes to mind is the internal control structure. This is the primary concern –that the internal controls are generally ineffective in preventing fraud and other financial crimes. MCI is not an exception. The internal control weaknesses that existed at MCI that contributed to the commission of this fraud can first of all be seen in the area...
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...In order to be valid, the consent must fulfill several conditions as follows; 1. To be expressed by person who is mentally capable to conclude the act. It means that the parties must have judgment or discernment, must be able to understand the nature of the act and its consequences. A pers that has a full concrete capacity is presumed by law to have judgment or discernment. This legal presumption may be overruled by proving the temporary lack of judgment of the person in question, as for example for temporarily mental illness, or influence of drugs. You can find this in the civil code Art. 1205 paragraph 1 2. To be expressed by a pers. who has the intention to produce legal effects. This condition is not fulfilled when for example the pers. Is only kidding, he has no real intention to conclude a contract – informal bet. 3. To be externalized. It means that the consent must result from the words or even the actions of the parties. In this respect several problems arise in case of silence. Generally in our law the consent cannot be implied and therefore in case of silence it is considered that there is no consent at all. The inaction of the parties or the silence is not conceived as an expression of the intention to conclude a contract. However there are some exceptions to this rule, as follows (Art 1196 – paragraph 2) Exceptions: * The law expressly provides that in some cases that the silence of one of the parties must be considered as consent. For eg according...
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...Case Study: HOW A CFO PLOWED HIMSELF UNDER By Recitta Askew ACCT217 July 26, 2014 Fraud Theory and Prevention is getting a lot of attention these days, however preventing fraud and understanding fraud continues to puzzle corporations and is the focus of many studies and reasons why many internal controls are in place today. As an example Dr. Donald Cressey a fraud expert developed what is known as the Fraud Triangle Theory which essentially states that three elements must be present in order for fraud to occur and those are, Motive, Opportunity and Rationalization. This theory demonstrates how a highly regarded bank CFO committed fraud because all three critical elements were present which enabled him to embezzle $150,000. So in order to prevent fraud we must first understand how an individual such as Mr. McKinley can go from being a law abiding citizen to a white collar criminal. Therefore fraud prevention begins with understanding the Fraud Triangle, the importance of good internal controls and the role of external auditors and how they are all connected. First according to the Fraud Triangle “Motive is the reason people commit fraud…It is the driving force”. (Biegelman & Bartow, 2006, p. 32). In McKinley’s case the motive and driving force appears to have been the emotion of humiliation, after all he was a respectable church going family man, CPA and highly respected bank CFO. Therefore the driving force of protecting his image coupled with the...
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...Memorandum To:! From:! Date:! ! ! ! Subject:! Case 3.3 — The Anonymous caller! INTRODUCTION: The purpose of this memo is to provide guidance to the anonymous caller, examine issues related to aggressive accounting and financial statement fraud, and provide descriptions of the conditions within the fraud triangle. In providing guidance to the Anonymous caller, we will compare the risks between resigning immediately and staying with the current company. Further, we will discuss other sources of advice for the caller, including legal advice and the State Board of Accountancy. In examining aggressive accounting and financial statement fraud: we will discuss the prevalence of such acts, the pressures put on accountants to perform such acts, and how to determine whether these acts are in accordance with GAAP. The conditions within the fraud triangle are: an incentive to engage in fraud, an opportunity to commit fraud, and an attitude to rationalize the conduct of fraud. We will describe the conditions that existed in the case of the anonymous caller. THE ANONYMOUS CALLER: In this situation, the anonymous caller has recently started working for a small, privatelyheld company and the executives of the company are giving their bank potentially fraudulent financial statements in order to extend their line of credit. The first action the caller should make is to meet with the executives again. The executives have no accounting background, and may not be aware of the considerable risks...
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...CASE PREPARATION CHART Student Name | Jeremy Liew Wei Wen | Student ID | 1121116242 | Submission date | 16 May 2016 | Case title | Flat cargo berhad: An Auditor’s conundrum | Section | AC01 | ------------------------------------------------- ------------------------------------------------- ASSESSMENT To be filled by facilitator Components | Scores | Scores | | 1 mark | 2 marks | 3 marks | 4 marks | | Completeness of case chart | Case chart is incomplete | Some of the case chart requirements are met satisfactorily. | Most of the case chart requirements are met satisfactorily. | All case chart requirements is met satisfactorily. | | Submission | On-time submission | N/A | N/A | N/A | | TOTAL | | Case analysis STAGE 1 Issues Explain the main issues underlying the case. Place extra attention on the what, why and when. Main issue regarding to the Flat Cargo Berhad is consist of few factor, the main issue face by Flat Cargo Berhad, accounting fraud, found that Flat Cargo Berhad (FCB) was involved in fraud, this matter will bring great impact to the accounting profession of Malaysia and the public confidence towards the profession will collapse similar to the case of Enron that is revealed in the year of 2001 from the pressure which regard to sustain in the industry leader in Malaysia air cargo carrier and maintain reputation of FCB under the international crisis in oil. Opportunities, for the poor internal control, which poor audit committee which affected independence...
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