Corporate Fraud Schemes

It is possible to detect fraud in companies by paying attention to complaints raised by employees, the public, customers, and shareholders among others. In most cases, a complaint by the stakeholders of a company may indicate that something is not right in an organization. It is, therefore, important for extreme attention to be given to complaints raised about the organization and understand the source of the complaints. It may help to unearth unethical practices that take place in an organization without being detected. Missing, suspicious checks or bank receipts and records may also indicate fraud in a company (Wells, 2011). Fraudulent people avoid submitting checks or receipts that can make their activities known. The withheld or unavailable checks, and bank receipt in most cases contain information of illegal withdraw of money or deposit of less than the right amount. If the act is witnessed, it is necessary for investigations to be conducted to ensure that the there is no fraud in the company. If the loss of receipts and bank slips are accompanied by a decline in the organization’s finances, a fraud may be the cause, and an investigation is necessary. Auditing can also help to detect fraud in companies. The auditing can either be done by internal people who work for the firm or external auditors from auditing firms. Constant auditing helps to show the accountability of business operations, especially its finances and when several questions cannot be answered it may indicate a fraud. Auditors seek to understand the activities of the organization and how money is used. They should be given all the information requested in a satisfactory manner.

Teamwork is essential in fraud detection because it makes it easy for the action to be known and prevented. When people work as a team, they have the role of fulfilling the company’s goals and policies. It also helps people to report an unethical practice that a team member may be involved in and assist in its prevention. Most people understand the effects of fraud in a company, and this entails suspension or expulsion of the employee. In most cases, the people who work with the fraudulent people may also suffer the consequence as it may be perceived that they were also involved in the action.  When the effects are understood by every employee, teamwork will ensure that any person that participates in fraud is reported, and the appropriate measures are taken to avoid people from losing their jobs. Good leadership is also valuable in fraud detection because it ensures that illegal activities do not happen in a company. A good leader can detect when something is right in an organization and take the right action to end it before it escalates to become a bigger issue. Leadership will also prevent a person from losing their job especially if they are responsible for the operations of the company. When scandals are present in an organization, the leaders are usually blamed because they let it take place and they end up unemployed or suspended from their duties, even when they had no idea of the activities. A leader should understand their role in an organization and ensure that people engage in the tasks that are assigned to them. A leader will also help to avoid other employees who are innocent from losing their jobs and will also take appropriate measures to end the activity.

The Enron scandal involving the Enron Corporation, for instance, is one of the well-known corporate frauds that have been witnessed. It is because of the fraud practiced by some of the company officials that the company lost millions of dollars through failed deals. The company initially performed well in the market and its stock price was high as compared to others.  Despite its successful beginning, the company later relied on debts to fund its activities, and John Skilling helped conceal the truth from the public. Losses made by the corporation were carefully undisclosed to the stakeholders, and the public had the notion that the company was successful and highly profitable. The act was perfected by use of special purpose entities (SPE) which is a method that is used by companies to hide failed projects, deals, and assets from a firm’s book records so that the investors cannot know the truth (Knapp, 2015). The Enron scandal led to the bankruptcy and collapse of the corporation, and this resulted in the loss of millions for the shareholders and loss of jobs for the employees. When the shareholders found out the truth through a whistleblower from the company, they filed a lawsuit against Enron. A financial forensic investigation would have helped to prevent the corporation’s activities because it would have highlighted the fraudulent activities. Although Arthur Andersen was involved in accounting for Enron Corporation to ensure that it adhered to the right practices, it engaged in hiding the crucial documents and destroying evidence. A financial forensic investigation should be conducted by an ethical company and individuals, and it will assist in unearthing fraudulent practices. The investigations will also prevent the loss of money by shareholders and will also assure the employees of the security of their job (Maras, 2015).

Teamwork is helpful in financial forensic investigations because it helps the employees to work together with the investigators and discuss the accounting activities of organizations. The investigators should be independent and ethical to avoid cases of the influence of executives that may force them to withhold information from the stakeholders. Leadership also helps to prevent fraudulent activities as witnessed in the Enron scandal. The founder of the Enron Corporation, Kenneth Lay, Chief financial officer, Andrew Stow, and John Skilling formulated means that the shareholders of the Enron Corporation would not know about its debts. They demonstrated poor leadership, and this cost the shareholders much money. Leaders should ensure that they uphold the goals and objectives of an organization by practicing activities that are in line with its policies.

Research in fraud examinations and forensic financial professions is necessary because it helps students to learn about the different accounting methods that can be used by companies to hide fraudulent activities. The methods used vary regularly, and research will enable the learners to have an understanding of a majority of them. In my opinion, research is necessary in such cases because it is from the research that the students will learn of how company executives and employees participate in fraudulent behaviors. The research will also help them to understand how they can handle the situation if it arises when they are working and avoid companies from incurring massive losses. From the Enron scandal, the learners will learn the importance of proper accountability and the effects that a fraud can have on the public. Arthur Andersen was supposed to expose the company’s illegal practices but instead aided in hiding them, and this led to the effects witnessed, as well as being involved in the legal matter. Despite the urge and desire to withhold fraudulent activities from a company’s stakeholders, a fraud, and forensic financial investigator should be ethical and ensure that affected parties are aware of the situation of a business.

References

Knapp. M. (2015). Contemporary auditing. Boston: Cengage Learning.

Maras, M. (2011). Computer forensics. Burlington, MA: Jones & Bartlett Publishing.

Wells, J. (2015). Corporate fraud handbook: Prevention and detection. New Jersey: John

            Wiley& Sons, Inc.