...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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...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 STUDY #1 | The Function of Accounting Information Systems in the Enron and Bernard Madoff Fraud Cases | | | | | | | What is the definition of accounting information system? The Core Concepts of Accounting Information Systems textbook defines accounting information system “as a collection of data and processing procedures that creates needed information for its users” (Bagranoff, 2010). A key factor in determining the success in an organization is its accounting information system. It is the combination of the organization’s resources, such as its people, procedures, and business records that it (the organization) maintains to provide financial data. The basis of this case study is to disagree with the question of whether or not accounting information systems played a role in the Enron and Bernard Madoff fraud cases. All organizations should have an adequate, effective, and efficient accounting information system in tack. In my opinion, the Enron and Bernard Madoff fraud cases had the classic signs of pure greed; the accounting information systems were perhaps manipulated, ignored, and compromised to financially suit the personal gains of the individuals involved and did not assist with the cases. An important part of the accounting information system is its internal control system. Internal controls are methods and procedures used by an organization to safeguard assets, authorize transactions, and ensure accuracy of the accounting records...
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...Case Study 2 With deciding to go public; LJB Company would be required to follow the Sarbanes-Oxley Act; which stated that all public traded U. S. corporations are required to maintain an adequate system of internal control. As the President of the company it will be both your responsibility of the board of directors to make sure that the internal controls are reliable and effective. You must also hire an independent outside auditor to come in periodically to ensure the adequacy of the company’s internal control system. TO ensure that you will be set up to meet all the internal control requirements by the time LJB goes public, this report will list the requirements of internal control and state what your company is currently doing correct and that can help the company meet the internal control standards. Internal control is defines as all the related methods and measures adopted with an organization to safeguard its assets, enhance the reliability of its accounting records, increase efficiency of operations, and ensure compliance with laws and regulations. It has five primary components, a control environment, risk assessment, control activities, information and communication, and monitoring. These components are broken down further into six principles. These principles are establishment of responsibilities, segregation of duties, documentation procedures, physical controls, independent internal verification and human resource controls. By following the guidelines of these...
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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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...REPORT TO THE NATIONS O N O C C U PAT I O N A L F R A U D A N D A B U S E 2012 GLOBAL FRAUD STUDY Letter from the President & CEO More than 15 years ago, the ACFE’s founder and Chairman, Dr. Joseph T. Wells, CFE, CPA, conceptualized a groundbreaking research project to study the costs, methodologies and perpetrators of fraud within organizations. The result was the 1996 publication of the ACFE’s first Report to the Nation on Occupational Fraud and Abuse. Since then, we have released six additional Reports that have each expanded our knowledge and understanding of the tremendous financial impact occupational fraud and abuse has on businesses and organizations. We are proud to say that the information contained in the original Report and its successors has become the most authoritative and widely quoted body of research on occupational fraud. The data presented in our 2012 Report is based on 1,388 cases of occupational fraud that were reported by the Certified Fraud Examiners (CFEs) who investigated them. These offenses occurred in nearly 100 countries on six continents, offering readers a view into the global nature of occupational fraud. As in previous years, what is perhaps most striking about the data we gathered is how consistent the patterns of fraud are around the globe and over time. We believe this consistency reaffirms the value of our research efforts and the reliability of our findings as truly representative of the characteristics of occupational fraudsters...
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...ROLE OF AUDITORS IN FRAUD DETECTION, PREVENTION AND REPORTING IN NIGERIA Ayobami Oluwagbemiga Oyinlola Mr Tai Solarin University of education,Ijagun, Ijebu-Ode, oluwagbemiga@in.com Follow this and additional works at: http://digitalcommons.unl.edu/libphilprac Part of the Library and Information Science Commons Oyinlola, Ayobami Oluwagbemiga Mr, "THE ROLE OF AUDITORS IN FRAUD DETECTION, PREVENTION AND REPORTING IN NIGERIA" (2010). Library Philosophy and Practice (e-journal). Paper 517. http://digitalcommons.unl.edu/libphilprac/517 THE ROLE OF AUDITORS IN FRAUD DETECTION, PREVENTION AND REPORTING IN NIGERIA OYINLOLA OLUWAGBEMIGA oluwagbemiga@in.com Tai Solarin University of Education, Ijagun , Ijebu-ode Ogun State. Abstract This study investigates the role of auditors in the detection, prevention and reporting of fraud. Data were obtained from 184 respondents in Nigeria. The findings revealed that the respondents are very concerned about the problem of fraud. In addition, the respondents placed very high expectation on auditors’ duties on fraud prevention and detection. This perception is in contrast with the stated primary objective of an audit, as stipulated in ISA 200, which merely required auditors to form an opinion on the financial statements, but not of fraud detection. Keywords: Auditors, fraud, detection, prevention Introduction That an auditor has the responsibility for the prevention, detection and reporting of fraud, other illegal acts...
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...Introduction Scientific frauds could be also called as knowledgeable deception and they are high on rise, some of them stayed within the scientific community making headlines and some them have reached the public who have paid the price of such frauds such as in the case of Autism linked MMR vaccine, which had caused a stir and people still remain to be affected by it and then there is the case of Woo-Suk Hwang,an stem cell researcher who rose to fame however soon it was known that the data was fabricated and the papers were retracted.The general public wasnt affected by it however it does involve and time and money to replicate such results and which is never acheived. So it actually a fraud or a human error, the only difference between a fraud and an error is intention. It could be argued that is there any room for scientists to make errors and yes we all are capable of making errors, they can make errors too however they have the chance to correct such errors before publishing such data instead such papers do see the light of the day, a lot is dependent on these scientific researchers then why is the data tampered and results are achieved per the own needs, a research shouldn’t driven as per the needs of an individual or for any sector [1]. It is based on any actual data which may eventually lead to saving lives or aiming for a better world or better resources or a better environment. Driving factors for scientific frauds Science is a result driven discipline, a ‘Publish...
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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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...Abstract 2 2.0 Introduction 3 3.0 Objective of the case-study 5 4.0 Literature Review 6 4.1 The Corporate Kitchen 6 4.2 Recipe 7 4.3 Finished dish 7 5.0 Result and discussion 8 5.1 MEMSTECH 8 Enter the corporate kitchen 8 The cooking recipes. 14 The finished dish 15 6.0 Conclusion 17 Appendix 18 Bibliography 19 Abstract Financial statement fraud is a very costly type of fraud and has a significant financial impact on the company businesses and also individuals, as well as influence investor confidence in the markets. In this project, our group will going to present on a case study in Financial Statement Fraud by a company that we choose. First of all, in this report we will investigate on our background of the Case Study Company which is MEMS TECHNOLOGY BHD. In the case study, we will determine the current status of the company and how the financial statement fraud will give impact to the organization by referring to the company’s annual report 2009. Hence, in this report we will give some practical guide on the different schemes and components that are used for detection on the Financial Statement Fraud that might be probably incurred in the company annual report 2009. 2.0 Introduction Financial reporting frauds and earnings manipulation have attracted high profile attention recently. The generally accepted definition of the financial statement fraud is the deliberate, misrepresentation, misstatement...
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...Financial Statement Fraud ACCT 710: Assignment 6-2 Shannon Baxley David Welch September 24, 2011 Table of Contents Abstract………………………………………………………………………………………3 Introduction…………………………………………………………………………………..3 Literature Reviews……………………………………………………………………………5 Conclusion…………………………………………………………………………………..16 References…………………………………………………………………………………...18 Abstract This paper describes financial statement fraud (FSF) and how it may occur within companies. The reason of this study was to research FSF detection and prevention. Research was also done to determine any influences that SAS (Statement on Auditing Standards) No. 82 and SAS No. 99 had on audit programs and the analysis from external auditors. Thirteen scholarly journals were reviewed in order to analyze SAS No. 82 and No. 99 and to show ways to detect and prevent fraud. Results found that managers and/or auditors can create fraud intentionally and unintentionally. There are ways to prevent fraud and educating managers and/or auditors is a good way to make sure fraud does not occur. Introduction Financial statement fraud (FSF) involves the premeditated issuing of phony information on a financial statement (financial statement fraud, 2011). FSF occurs when a company exaggerates assets or revenue, or when it devalues liabilities and expenses (financial statement fraud, 2011). The American Institute of Certified Public Accountants or AICPA defines fraudulent financial reporting as “intentional misstatements or omissions...
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...Unit Seven – The Lennar Company Case Study Analysis Kaplan University School of Business MT460 Management Policy and Strategy Author: Edna McEwen Professor: Dr. Strouble Date: June 29, 2015 LENNAR CORPORATION’S JOINT VENTURE INVESTMENTS Company Name: The Lennar Company Topic of the Week: Create a case study analysis focusing on the company’s abuse and fraudulent activities relative to CSR and business ethics. Synopsis of the Situation The Lennar Company faces the damage caused by the Fraud Discovery Institute’s claims, the financial crisis, mortgage defaults, and dramatic fall in house prices, particularly in some of their active markets. The country is in the midst of an economic recession that began in 2007, and on top of that, the company has been accused of operating a ponzi scheme and profiting while allowing investors to lose money. On the day of the announcement by the Fraud Discovery Institute, the company’s stock price took a dramatic fall. The problem is, the person that founded the Fraud Discovery Institute is a ‘reformed’ crook who has made it his mission to expose fraudulent behavior of others as a way of redeeming himself from some of the negative things he has done. The question is, is he really reformed, or is this just another scheme he has plotted to gain access to company’s information so he can pounce when the company is most vulnerable. Alternative Solutions Since Lennar’s mission statement states...
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...Is the Fraud Act a Useful Tool in E-Crime Prosecution? Executive summary This paper sought to examine whether the Fraud Act 2006 could be a useful tool in the prosecution of e-Crimes. It turns out that crimes on the computer net works and other electronic forms have been prevalent for more than two decades without being successfully prosecuted in majority of cases. The Thefts Acts 1968 and 1978 had inadequacies to deal with the kind of offences possible on the electronic forms. Hence, to avoid continual amendments to Theft Acts which could not have retrospective effect, Fraud Act 2006 has been enacted with sweeping changes to enable prosecutions of e-Crimes. Fraud Act 2006 has removed the shortcomings of the Theft Acts within the context of e-Crimes. Although the Act is portrayed to be a little harsh on the one hand, in comparison with the Theft Acts, the Act is certainly equipped as a better prosecution tool to deal with e-Crimes, on the other.. Table of Contents Chapter No | Particulars | Page No | | Executive Summary | 1 | 1.0 | Introduction | 3 | 1.1 | Background | 3 | 1.2 | Aims and Objectives | 14 | 1.2.1 | Aim | 16 | 1.2.2 | Objectives | 16 | 1.3 | Conclusion | 16 | 2.0 | Literature Review | | 2.1 | History behind Fraud Act 2006 | 17 | 2.2 | Fraud Act compared to earlier law | 20 | 2.2.1 | Fraud by false representation | 22 | 2.2.2 | Section11 Obtaining Services Dishonestly | 28 | 2.2.3 | Fraud as a conduct crime...
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...developed world with its primary pharmaceutical products. An Australian professor wrote a revealing article about how Glaxo manipulates research evidence in medical journals. He gained this insight through internal company documents he had access to during a lawsuit. Bottom line? If you think corrupt and dishonest drug companies are being honest about vaccine safety, efficacy and adverse reactions, you have been deceived by their marketing and PR departments. Glaxo is pleading guilty and paying a criminal fine of $1 billion for misreporting efficacy data and failing to report adverse safety data from post marketing studies. ****************************************************************************************** Department of Justice Office of Public Affairs FOR IMMEDIATE RELEASE Monday, July 2, 2012 GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data Largest Health Care Fraud Settlement in U.S. History Global health care giant GlaxoSmithKline LLC (GSK) agreed to plead guilty and to pay $3 billion to resolve its criminal and civil liability arising from the company’s unlawful promotion...
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...of this crime. Discussion will then focus on victims and perpetrators of identity theft. Common techniques used by identity thieves will be explored along with tips to protect consumers and businesses from having their identities stolen or data breached. Legislation in place to prevent and prosecute identity theft will be discussed. How to report identity theft is also explained. Defining Identity Theft The U.S. Department of Justice defines identity theft, also called identity fraud, as “all types of crime in which someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain” (U.S. Department of Justice, 2015). Identity thieves use personal data such as Social Security numbers, bank account or credit card numbers to personally profit at the victim’s expense. These breaches allow thieves to take funds out of bank accounts or in the worst cases, take over a victim’s identity completely, running up huge debts and committing crimes using the victim’s name. Victims not only suffer the out-of-pocket financial losses, but they may have to rebuild their reputation in the community due to the perpetrator’s actions (U.S. Department of Justice, 2015). Identity theft is expected to surpass traditional theft as the leading form of property crime. Security analysts state everyone should prepare to be a victim of identity theft at some time in their lives (Anderson, 2013)...
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