Accounting Fraud Case Study

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Introduction

Although the person in question is wealthy, it is obvious that they are somehow committing fraudulent acts. Most likely, the fraudster used their businesses to launder funds given to the guardian of a child. According to the fraud triangle, there are three factors that trigger fraud: environmental pressure, the possibility of committing a crime, and the ability to justify oneself (Riley & Kranacher, 2019).

Discussion

Obviously, the pressure of the external environment does not play a role in this case since the fraudster is a wealthy person. Most likely, the opportunity to commit a crime plays a major role: the fraudster is the owner of the enterprises and can hide the crime, hiding behind plausible reports. In addition, the fraudster has moral self-justification: they did not steal money from a child but have the right to dispose of them as a guardian.

It is assumed that the fraudster does not spend money on the maintenance and education of the child, as well as on improving housing conditions, since this documented amount is much less than the actual one. Most likely, in this case, accounting fraud takes place – the manipulation of financial statements. In this case, fraud is used not to increase the visibility of the company’s well-being but to launder funds. For example, one of the fraudster’s businesses may deliberately inflate its costs during financial reporting. The fraudster’s company may enter a false line of expenses, for example, for the maintenance of the premises, which in reality does not occur. This type of fraud is complicated to prove, and the fraudster manages to evade responsibility.

Conclusion

Most likely, ordinary employees have no idea about what is happening in the organization. For a scammer, manipulating the accounts is the easiest way to get money, remaining very difficult to prove.

Reference

Riley, R., & Kranacher, M. (2019). Forensic Accounting and Fraud Examination. Wiley.

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