Organizational fraud

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Organizational fraud

Inthe Securities and Exchange Commission SEC filed a complaint against the company, accusing it of "perpetrating a massive financial fraud lasting more than five years. The company headquarters managed the fraud and recorded topside entries.

Fraud - Wikipedia

For most corporations, organizational transformation is a continuous process that enables adaptation to an ever-changing global business environment and encourages advances in technology, science, competition, customer demand and government regulation.

The most common form of change is corporate restructuring outsourcing, offshoring, etc. The most complicated, dramatic and challenging form of change is mergers and acquisitions. Change is inevitable, but it exposes companies to significant financial, occupational and compliance fraud risks — as Waste Management Inc.

In some instances, senior managers have used restructuring or mergers and acquisitions as vehicles to commit fraud. Public Companiesexamined U. The study identified "the need to meet internal or external earnings expectations" and "the need to bolster financial performance for pending equity or debt financing" as the most commonly cited fraud motivations.

Organizational fraud

A transition can pressurize senior management to meet or exceed objectives or financial targets. They often try to hit such financial targets as increased or sustained profitability, revenue, positive cash flow generation and cost reduction — all while maintaining high levels of quality and productivity.

Employees also might be subject to personal financial pressure because of excessive debt due to living beyond their means, gambling or addiction problems.

Organizational Chart | Los Angeles County District Attorney's Office

Also, worsening general economic conditions might induce pressure. Periods of change might weaken internal control systems and make management oversight and monitoring of the internal control systems ineffective.

Employees might perform controls less diligently because they lack care, focus, engagement or loyalty towards the company. Supervision might become ineffective as managers leave the company. With reduced supervision, in some extreme instances, employees might collude to override controls for personal gain.

Fraudsters generally are able to rationalize misconduct, regardless of organizational conditions. However, a merger or acquisition might induce other employees, who are normally honest during normal circumstances, to commit crimes.

Some might attribute their declining loyalty to changes of position or loss of jobs. Some might believe that change leads to discrimination and unfair practices. Others might focus on entitlement because they feel underpaid or underappreciated. With this mix of pressures, increased opportunities to commit a crime and easy rationalizations, fraudsters might find themselves in a prime position to commit fraud.

Failing companies always feel pressure from shareholders to boost earnings.

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Sunbeam-Oster is a classic case of a new top pressurized boss fudging the figures to illegally prop up a stumbling firm.

InSunbeam, maker of Sunbeam electric blankets and Oster blenders, announced a corporate restructuring, recorded a significant accounting charge and hired Al Dunlap as chairman and CEO to turn everything around.

That same year, the company took a huge write-off as it closed plants and laid off employees. However, its reported profits soared in Accuses Former Sunbeam Official of Fraudby Floyd Norris on May, 16,Dunlap told analysts in a earnings conference call, "We are winning in every aspect of our business.

According to The New York Times article, the suit stated that Sunbeam "orchestrated a fraudulent scheme to create the illusion of a successful restructuring of Sunbeam and facilitate the sale of the company at an inflated price.

Three acquisitions, announced inmasked the fraud: Dunlap felt pressured to turn Sunbeam around.

Organizational fraud

He used his position as an opportunity to commit the fraud. And according to, Sunbeam Corporation: Here are some points of action that management and boards in changing organizations should heed: Maintain effective corporate governance and periodically communicate key governance activities to employees to remind them that despite the transition, the corporation continues to implement internal controls and it requires compliance with them.

Governance activities could include audit committee meetings to review internal controls, including interactions with external and internal auditors. Maintain strong company-level controls. This includes strong Tone at the Top, hiring practices such as background checkstraining and retaining clear policies and procedures.Operational fraud — such as frauds that happen in the internal/external supply chain operations — can be divided into two basic classifications of fraud: organizational versus occupational.

When a person or persons commit occupational fraud, they have used their . Course Overview: This course provides an intensive examination of fraud against the organization.

It reviews the major characteristics of fraud, along with the set of circumstances that foster corrupt environments that either encourage or allow for the committing of fraud. The fraud has pushed both families to the brink of financial ruin, the Arizona Daily Star reported. A trail of fraudulent documents led to Seth Nichols, the stockyard's year-old office manager.

Detecting Fraud in Organizations: Techniques, Tools, and Resources [Joseph R. Petrucelli] on *FREE* shipping on qualifying offers.

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A savvy examination of where people and value meet, creating theopportunity for fraud An essential reference for all business professionals. The ACFE's Report to the Nations on Occupational Fraud and Abuse points out that in percent of financial statement fraud cases and 11 percent of corruption cases, excessive pressure from within the organization was a motivation to commit fraud (page 61).

The fraud triangle illustrates that the most important lessons from Enron lie in the way that a corporate culture championed by CEO Skilling overcame a sophisticated and widely lauded set of management controls and in the importance of carefully balancing the core concepts of leadership, organizational culture and control within organizations.

Preventing corporate fraud during organizational transformation