The fraud that occurred in the organization and the impact it had on investors and creditors.
On June 2012, what appeared to be a normal business day for Michelle Marsico, President of Village View Escrow in Redondo Beach, California, turned into a two year ordeal that ends with lawsuit settlement. Marsico checked the accounts in the morning as she has done every morning and found that cyber crooks had stolen approximately half a million dollars. Two dozen transfers to 20 recipients whose names and address were not recognizable to Marscio. At first thought Marsico thought it was a mistake but, later found that Village View Escrow and Professional Business Bank was a victim of a cyber heist. Marsico later found out that Professional Business
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The investigation would have analyzed the risk factors by conducting an internal audit. The internal audit would have allowed them to detect the different channels in which money could be stolen and how the attacks could occur. For instance the risk factors would have shown the lack of security provided on the company’s bank account. Also, the fraud elements would have been identified, this would have enable them to know what measures the money may be stolen and what means of attack would be used. In this case the unauthorizations of financial transactions to twenty (20) different account without proper authorization. The financial forensic investigation would have also allowed the investigators to identify the type of cybercrime that can occur. They would have formulated an hypothesis through brainstorming. Then they would have analyzed the many solutions to the hypothesis. This is done by making interpretation of the evidence provided and evaluating with each hypothesis. Of which the hypothesizes that do not have enough data would be dismissed and the hypothesizes that have enough data would be analyzed more closely (Kranacher, Riley & Wells, …show more content…
In addition, Village View Escrow chose to sue Professional Business Bank for failing to protect its customers’ private information. Since the number one reason the cybercrime occurred was because Professional Business Banked failed to provide the proper security measures to secure customers accounts. Therefore, the bank is responsible in paying back all the funds that was transferred out of Village View Escrow’s accounts along with all necessary expenses that was relevant to the loss. Although the money can be recovered the reputation of the company from this loss cannot. Village View Escrow can recover from the loss of customers by focusing on assuring current and future customers that measures have been taken to secure their funds and that Village View Escrow is using the latest effective detection in technology to secure
Being an investigator to Apollo Shoes, the financial statement fraud scheme likely to be present is dependent on the nature of the company. Statement on Auditing Standards No. 99 (“SAS 99”) requires to focus on two broad areas of fraud:
One of the most recent white-collar crime involved Wells Fargo, a banking and financial services provider. In 2016 San-Francisco based bank Wells Fargo (WFC) employees secretly created millions of unauthorized bank and credit card accounts without permission of their customers. Opening about 1.5 million fraudulent deposit accounts and submitting 565,443 credit card applications allowed Wells Fargo employees to boost their sales targets and receive bonuses. Consequently, customers were wrongly charged fees for accounts they did not know existed. In this business crime scenario, Wells Fargo involved to pay $185 million in fines and refund $5 million to affected customers. Also, around 5,300
Weld, L. G., Bergevin, P. M., & Magrath, L. (2004). Anatomy of a financial fraud. The CPA
The Le-Nature fraud was similar to the Madoff Ponzie scheme, where Gregory Podlucky took money from new participants and investors to pay off longer-standing investors. A combination of various forms of frauds committed from January 2000 to October 2006, including but not limited to, accounting and money laundering, were the primary causes of the company’s ultimate demise. However, unlike Madoff, the Le-Nature collapse was an internal failure that was not related to external economic conditions. The lack of transparency in financial and accounting records to stakeholders was the reason for the investors to force Le-Nature into an involuntarily bankruptcy in 2006. This step led to the discovery of the fraud committed and the company’...
The major groups that were directly affected are investors, employees, and suppliers. Here we should make the distinction between different types of investors. There are two major types of investors: insiders and outside investors. Insiders are the investors who know the information that is not known publicly and may benefit them in some way. Outside investors are the investors who only know publicly known information. In our case, outside investors was the group that lost the most. On the other hand, insiders, notably Mickey Monus and David Shapiro, were the one that gains millions on IPO. The group who suffered was employees of Phar-Mor. After the scandal was revealed, most of the stores were closed to cover up losses. As a result, thousands of employees got fired. Another party that was damaged by the scandal was Coopers&Lybrant, the firm that did the audit for Phar-Mor, lost its reputation as a firm who does an audit with integrity. The secondary effect of the scandal was the overall mistrust among investors. They thought that if a giant retailer can forge its accounting books, why smaller companies wouldn’t do the same. As a result, investors became reluctant in investing into businesses that caused harm to the economy as a whole. The last but not least group that was affected by the scandal is Phar-Mor’s suppliers. Mickey Monus was fiercely fighting with them to make the chipset deals to cover up his losses, sometimes using inappropriate pressure and causing suppliers making unprofitable deals. In additions, Monus forced them to pay fees and sponsor his basketball League using buyer power of his company. In addition, a lot of bills for supplies were unpaid for months by Phar-Mor. Some suppliers said that they hated doing business with Phar-Mor, but had no choice since it had an access to vast amount of customers.
Profits were inflated by $1.7 billion to meet earnings targets which resulted in investors losing more than six billion dollars while the perpetuators made their illegal loot. The officers were engaged in improper accounting practices to achieve their selfish objectives. These practices included among others: excluding depreciation charges on their garbage trucks, extending their useful lives, capitalized operating expenses and failed to make provisions to pay income tax and other expenses. In addition, Arthur Andersen, has been appointed auditor for a considerable period and issued unqualified audit opinions on accounts which contained many fraudulent
Madura, Jeff. What Every Investor Needs to Know About Accounting Fraud. New York: McGraw-Hill, 2004. 1-156
Profits were inflated by $1.7 billion to meet earnings targets which resulted in investors losing more than six billion dollars while the perpetuators made their illegal loot. The officers were engaged in improper accounting practices to achieve their selfish objectives. These practices included among others: excluding depreciation charges on their garbage trucks, extending their useful lives, capitalized operating expenses and failed to make provisions to pay income tax and other expenses. In addition, Arthur Andersen, has been appointed auditor for a considerable period and issued unqualified audit opinions on accounts which contained many fraudulent
Title: Wells Fargo Fake Accounts Scandal: Unveiling Systemic Culture of Pressure and Misconduct. The Wells Fargo phony accounts scandal demonstrates the inherent hazards of valuing profit over ethics in corporate culture. In a shocking revelation that shook the foundations of one of America's greatest banks, Wells Fargo workers were discovered to have participated in extensive fraudulent operations, establishing millions of illegal accounts and credit cards for consumers without their knowledge or approval. This heinous violation of trust harmed the bank's clients and revealed systemic cultural flaws firmly embedded in Wells Fargo's organizational architecture.
In today’s day and age, there is a lot of news that is related to corporate accounting fraud as companies intentionally manipulate their financial statements to show a better picture of their financial health. The objective of financial reporting is to provide financial information about a company to its various stakeholders such as investors and creditors so that these stakeholders can make decisions accordingly. Companies can show a better image of their financial well being by providing misleading information. This can be done by omitting material information from the books or deceitful appropriation of assets such as inventory theft, payroll fraud, check forgery or embezzlement. Fraudulent financial reporting will have an effect on the
Giroux, G. (Winter 2008). What went wrong? Accounting fraud and lessons from the recent scandals. Social Research, 75, 4. p.1205 (34). Retrieved June 16, 2011, from Academic OneFile via Gale:
...ss. As fraudulent audit reports were presented to investors showing above market returns to keep capital coming in, actual losses kept compounding and Samuel Israel could not do anything to reverse them. The situation finally became too dire to handle and the fund entered bankruptcy while Mr. Israel and his two closest associates were sentenced to some of the harshest white-collar punishments of the time period.
For those who do not know what fraud is, it’s basically deception by showing people what they want to see. In business it’s the same concept, but in a larger scale by means of manipulating figures that will be shown to shareholders and investors. Before Sarbanes Oxley Act there was “Enron Corporation”, a fortune 500 company that managed to falsify their statements claiming revenues over 101 billion in a span of 15 years. In order for us to understand how this corporation managed to deceive the public for so long, the documentary or movie “Smartest Guys in the Room” goes into depth by providing viewers with first-hand information from people that worked close with or for “Enron”.
The first issue that makes the fall of Enron was special-purpose entities problem. Between 2008, the mark-to-market practice led to schemes that
The principle territory we are planning to address is accounting fraud and how it could impact an organization by answering, the who, what, when and how. Its goal is to increase the awareness of accounting fraud and fraud counteraction. The intriguing thing about accounting fraud is that little disclosure as a rule usually leads to an enormous increase in fraud. A number of categories and sub-categories can be divided up for fraud.