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: And the Fraud Continues - Case Study Example
Finance & Accounting
Pages 4 (1004 words)
Case Study 1: And the Fraud Continues Case Study 1: And the Fraud Continues Introduction Accounting fraud is one of the greatest threats to the long term sustainability of organizations today. The last decade witnessed a series of corporate failures in the United States due to accounting fraud…
To illustrate, the company did not have proper internal control mechanisms to keep the level of bad debts and accounts receivables within the fixed range. Hence, even poorly performing firms obtained huge amounts of credits from MCI and this condition adversely affected MCI’s operational efficiency. When receivable collection periods went beyond the stipulated timeframe, the organization was forced to write off some of its receivables. Undoubtedly, this condition caused the firm to experience a rise in its expenses and thereby a decline in earnings per share. Ultimately, MCI’s stock price dropped due to the decline in EPS. As Lyon and Tocco (n. d.) point out, Pavlo used a variety of accounting tricks to convince the management that the level of bad debts and amount receivables had fallen under the safety range. In other words, Pavlo totally manipulated the accounting system to conceal the actual state of affairs of the company. It is obvious that the absence of a well executed internal check system assisted Pavlo to apply unfair accounting tricks to deceive the company management. A person is not allowed to carry through a transaction from beginning to end under the internal check system. ...
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