Question

Find an accounting-related fraud court case that is no more than 2 years old and then find an accounting-related fraud court case that is over 10 years old. Give a brief summary of both court cases. Compare and contrast the 2 court cases. Discuss if you think the level of sophistication in committing fraud has changed over the years. Who is committing the crime and how? What impact, if any, will the changes you found have on the auditor and/or fraud investigator?

Answer 1

In the recent year a company which runs in software industry was found gulit of commiting fraud.

Glimpse of the case :

The company has lot of expenditure fo maintenance but there were no corresponding income generation to the company.

The company has raised bogus invoices showing sales form different customers which increases their sale revenue as management thought of not to liquidate company for some years (as it is a reputed company) and they have also manipulated bank transactions to show receipts for sales and to show bank balances for applying loans.

The fraud revealed, from a doubt raised by whistle blower. The company has applied for loans for meeting it costs and the whistle blower asked what is the need for funds as the company having huge bank balances and regular sale revenue.

Accounting fraud in the past decade

In this case the company employees(higher level management) have misused the assets of the company which leads to loss of income for company.

They have used the cash recieved from customers without accounting in books and managed to write them as bad debts in their books. The collusion of employees plays a major role because a person in a company does not have all power. His work is being watched by others.

So the mistake done by one employee will be covered by mistake done by another employee which leads to total misappropriaton.

Understanding

Though the scenarios of fraud are different , there is a similarity in those two cases. The people intentionlly violated the controls and rules. Generally fraud can be of two types misappropriation of assets and fraudulent financial reporting.

The first case is of misuse of assets and second one is of fraudulent reporting

Comapring the two cases the internal controls and accounting system was strengthened in the recent years. Even top management is being reviewed by externl parties. The review system has failed in the first case thatis why the top management commited fraud.

In the old case even employees were having powers to take control of company assets which leads to dilution of compqany wealth. So the comapny is lacking controls and top management presence leading to fraud.

Auditor has to first get reliabilty on interal controls that they are effectively working and sufficient, suitable for comapny size and work enviornment. Then he has to look upon management