csht Answer

Running head: FRAUDS 1

FRAUDS 3

Accounting scandals

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Frauds in accounting

One of the most recent accounting scandal cases was witnessed in Steinhoff international, where a retail holding company is dealing primarily in furniture and household goods. The firm operates in Europe, the United States of America, Australia, and New Zealand. The company was experiencing issues with the overstatement of the profits for several years, amounting to more than 7.4 billion dollars accounting frauds. Following the Reuters article, Steinhoff disclosed these irregularities in their accounting records in the year 2017, but it was not until the audit and complete investigation conducted by the price water house that the fraud was revealed ("5 most scandalous fraud cases of 2019," 2020). The firm was recording fictitious and irregular transactions, which totaled to more than 6.5 billion euros, which was an idea from individuals form the firm and external parties as they inflated the firm's asset and property values. On the discovery of the fraud, the chief executive officer of the firm Jostle resigned, and other high ranked executives of the firm also exited the company, which led to the plummeting of the shareholders' value (Matulich & Currie, 2016). The case and investigation into the fraud are in progress for further legal actions.

Some of the mechanisms that would have led to the detection of this fraud earlier include having robust internal control in the firm and rotation of duties, which would have strengthened the internal audit faction hence detect the frauds on time (Doxey, 2019). To prevent the occurrence of the scam, the company financial statements should have been annually subjected to external aiding form an independent auditing company such as the price water house, which would have effectively detected the adverse trends in the firm's operations and record keeping. External auditing would have highlighted areas of noncompliance and prevent errors in accounting.

References

5 most scandalous fraud cases of 2019. (2020, January). https://www.fraud-magazine.com/article.aspx?id=4295009428

Doxey, C. H. (2019). Internal controls toolkit. John Wiley & Sons.

Matulich, S., & Currie, D. M. (2016). Handbook of frauds, scams, and swindles: Failures of ethics in leadership. CRC Press.