Drabinsky and Gottileb: Accounting - Case Study Example

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Drabinsky and Gottileb: Accounting

Since the company was incurring heavy losses, so the two devised this kickback scheme that would help them gain a significant share of profit before paying dues of other shareholders. The vendors supplied Livent with inflated bills. There was in fact no activity that can be regarded as reasons for the inflated bills. As a result of the kick-back schemes and huge losses, Livent Inc started fudging the real data with false data. In order to make the company look financially sound and profitable, the two conspirators decided to create software that will help to create a systematic way of manipulating the financial data. These points to another instance of fraud scheme at Livent. The manipulation involves simple erasing from the accounting records expenses and liabilities that occur at the end of each quarter. In accounting standards this is illegal, since this inflates the profit artificially. In order to decrease the expenses the reproduction costs from a currently running show are transferred to an ongoing show. In accounting standards this cannot be done, since only those costs can be realized that have incurred and not those that are yet to occur. ...Show more

Summary

Drabinsky and Gottileb operated a kickback scheme from 1990 to 1994. In the kickback scheme two Livent vendors are appointed who helped Drabinsky and Gottileb, siphon millions of dollars from the company directly into their own pockets…
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