2.2 Describe the causes of and common types of fraud and the impact of this on the organisation. 2.3 Explain the methods that can be used to detect fraud within an accounting system. 2.4 Explain the types of controls that can be put in place to ensure compliance with statutory or organisational requirements. 2.5 Explain how an internal control system can support the accounting function. 3.
Ethicality of Accounting Activities Learning Team E - Ashley Horne, Brochelle Shirley, Erika Schmidt, and Mareta Guerrero ETH/376 September 30, 2013 Tammie Holland Ethicality of Accounting Activities To evaluate the ethicality of accounting activities, Learning Team E will review the Cynthia Cooper and WorldCom case using the following criteria. This review will identify the key accounting activity involved in this case and evaluate the accounting activity in terms of the AICPA Code of Professional Conduct. Additionally, determine how the accounting activity was or was not equitable to internal and external stakeholders and which aspects were ethical or unethical. Finally, through the identification of key team members in this case, this review will explain his or her ethical or unethical actions and how those actions influenced the events that occurred. Key Accounting Activity Involved The key accounting activity involved in the case of Cynthia Cooper and WorldCom was capital expenditures, which is defined as “…the funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment” (Capital Expenditure - Capex, 2013, para.
Lessons learned: Auditing firms can be held responsible for the misrepresentation of financial information if they don’t practice due care. Auditing firms should asses risky accounts and suspicious transactions to ensure the reliability of the financial statement. Questions 1. Identify legitimate business practices that corporate executives can use for the primary purpose of manipulating or “managing” their company’s reported operating results. Are such practices ethical?
Entities such cases have international repercussions and prosecution of the guilty person aggrieved. In Ireland, a class suit has been brought against Alternative Advantage plc and Thema International Fund plc, investments funds that handled business for Madoff, by clients whose investments were affected by the case. SEC has taken a number of reforms to prevent malicious businessman deceive the public. Including through the promotion of investment funds designed to surprise audits, and establish measures of different portfolios of assets authenticity investor protection. Question # 2 The main objective is to establish an independent auditor to submit the accuracy of the accounts, and records to confirm the actual existence of assets.
1. Discuss the Internal control weaknesses that existed at MCI that contributed to the commission of this fraud The big Internal control weaknesses existed at MCI was that Pavlo can manipulate the Account Receivable system which he had helped to create and develop. When the same employee is able to receive payments, update or manipulate accounts receivable records, or even reconcile the company's bank account, he may be able to embezzle money from the company (http://smallbusiness.chron.com/strengths-weaknesses-accounts-receivable-35111.html) that was exactly what happen to MCI with Pavlo, through the following tricks: a) Identifying Account receivables that were going to be written off and converted them into notes receivable, this way expenses are not touched and an Asset is created in the balance sheet. b) Unapplied cash was used to mask the bad debt and slow payments, the allocations of amounts over certain sums of money to delinquent or bad receivables, made the expenses related to the write off of the receivables would not hit the income statement. c) “Placeholder credits” was used.
1) 2) 3) 4) Because of the existence of securities markets anomalies Because there could be indirect cash flow effects of accounting standard changes Because accounting policy changes affect the amount of income tax payable Because accounting changes reflect a move from historical cost to fair value b. Earnings management could be viewed as “opportunistic” or as an example of “efficient contracting,” depending on the goals of management. Which of the following settings reflects the efficient contracting aspect of earnings management? 1) Earnings management might help insolvent firms avoid immediate bankruptcy. 2) Earnings management might help credibly convey private information about the long-term earnings potential of the firm.
Case Study 1: And the Fraud Continues Christina L. Bradley Professor Timothy Brown ACC 571- Forensic Accounting April 21, 2012 Abstract This paper is about Walt Pavlo and his fraud against MCI when he was employed as a billings/collection manager. We are going to discuss in this paper what the internal control weaknesses was that existed at MCI that contributed to the commission of this fraud, we are going to identify and justify the approach one would take if they suspected fraudulent activity within the organization where they work. Also we are going to critique the ethical nature of Pavlo’s actions in this case and apply one theory related to crime causation to this case. And The Fraud Continues Walt Pavlo was hired by MCI in the year 1992; he worked in the carrier’s financial unit and was one of a group of managers responsible for billing and collections. It was not until 1996 that Mr. Pavlo started the fraud against MCI which involved several customers.
Finally, it is concluded that conflict theory contributes to the understanding of why individuals both rich and poor engage in crime. Wealthy individuals such as those in high managerial positions tend to commit white collar crimes (Bessant & Watts, 2007; Cressey, 1986; Croall, 2001). Crimes of this nature involve fraud, environmental crimes, and occupational health and safety breaches, such crimes can result in economic and societal instability (Cressey, 1986; Croall, 2001). Instability affects society as a whole by prompting funding declines in sectors such as education, health and welfare. This decline in resources ultimately causes conflict within the institution and society more broadly (Anthony & Cunneen, 2008; Croall, 2001).
Explain the terms ‘Identity Theft’ and ‘Identity Fraud’ and how they are different. Discuss some examples of the above terms and explain how consumers can protect themselves from this type of crime. (10 Marks) Identity fraud (also called identity theft) is wh en somebody pretends to be another person. Identity theft included any unauthorised usage of another person’s personal information with the intention of committing fraud. A person’s identity and personal information are valuable but we live in an information age where this information can become available to others who might use this to open up bank accounts, get credit cards, loans, welfare benefits, buy things in your name and even apply for passports and driving licences in your name.
The case of Bernard L. Madoff will remain etched in the memory of investors and traders for the unparalleled example of Ponzi scheme that it set and as the most financially devastating crime. Bernard Madoff; also known as Bernie Madoff, was involved in 'Ponzi Scheme' which is predominantly a financial scam. Ponzi scheme is characterized by investment operations where returns are paid to the investors by their own money or from that of other investors. Earnings are usually low because so as to entice investors, higher returns are used thereby inducing lower income for the owner. This lower income prompts the owner into paying returns to investors from other investors' money rather than the profit.