Discussion Topic: Accounting frauds within the revenue, expenditure, and production cycle.

It is very easy to do a Web search and locate articles concerning accounting frauds as a result of misappropriating transactions using the revenue, expenditure, and/or production cycle(s). Locate a recent (no more than 5 years) news article concerning a fraud using one of the aforementioned cycles of a company located within the vicinity of where you live. Post a link to the article, and discuss how the fraud occurred as a result of the revenue, expenditure, or production cycle.

Also response each posted # 1 to 3 down below.

Posted 1

Hello Professor and Class,

As I did research for this discussion, I notice there are a lot of misappropriating cases in Iowa’s history. I did not notice an obvious stereo type as a profession but did notice the accused committed the fraud and eventually deposited the money into their own personal account. So, it seems these people clearly do not think these crimes all the way through. Why would these people not think they were going to get caught, it just does not make sense to me? Most of the quantities of money is not that extreme, most of them being in the low hundred grand ranges. It does not make sense to me why someone would want to take the risk of loosing all their freedom and identity for 6 figures. The only thing I can think of is they got themselves involved committing crime, never got caught, felt comfortable over time, made a few little mistakes, and finally someone noticed and turned them in. Best advice I can give, think about what you will lose if you get caught, your freedom.

I found many examples of misappropriating fraud and could have chose any one of them but decided on 1. The article is about a man who worked at a hospital as a CEO. I do not like going to the hospital, it cost us way too much, I have always thought hospitals have always been out to take my money. So, I figured since this man worked for a hospital and was caught committing fraud, I would mention his trouble. Not everyone who works at a hospital is bad, wear would we be without the dedicated doctors and nurses who spend their lives saving ours. It is the individuals who own or run those hospitals who I believe are the reason for the ridiculous prices (Telegraph Herald, 2019).

This fraud accord in Manchester Iowa, by a man named Lonnie Butikofer. He worked at a Manchester hospital as a CEO. He has been accused of misappropriating over $100,000 dollars and could do up to 10 years in prison for his crime. In my opinion if you do this type of crime you should probably go to prison for more then 20 years. This is a slap on the wrist, once a thief always a thief in my opinion, this person will probably do this again. How Lonnie was caught is he sent out some emails that were for some reason labeled inappropriate, not sure what was inappropriate about them, but they got him busted. Because of the emails, the Iowa state auditor’s office did investigate Lonnie. After investigating Lonnie, another employee associated with Lonnie, Michael D. Briggs hid the money in expenses. Lonnie hid pretty much all the money he stole in personal trips (Telegraph Herald, 2019).

Thank you.

Reference

Telegraph Herald. (2019). Former CEO accused of stealing more than $100,000 from Manchester hospital pleads guilty. Copyright 2020 Telegraph Herald, 801 Bluff St PO Box 688 Dubuque, IA. Retrieved from https://www.telegraphherald.com/

Posted 2

Considering that I haven’t found a good fraud example of a company located in Florida, the article that I have read talks about a revenue fraud perpetrated by Marvel Technology Group Ltd. (located in CA) to accelerate sales to the fourth quarter of 2015 and the first quarter of 2016 that had been scheduled for future quarters. According to Freeman (2019), the purpose of this procedure was to close the gap between actual and forecasted revenue. The total accelerated revenue was around $ 88 millions (considering the two quarters).
This procedure masked the significant decline in customer demands, loss of market share and the reduction of future sales. As a result of SEC investigation and findings, the Company agreed to pay $5.5M penalty.

References
Freedman, Robert (2019, Sep 16) – SEC fines Marvell Technology $5.5M in revenue manipulation scheme. CFO Dive (Online). Retrieved from https://www.cfodive.com/news/sec-fine-marvell-technology-pull-in-sales-revenue-manipulation/563021/

Posted 3

Three former Ironclad executives were charged by the SEC in a $6 million fraud case in April of this year. Ironclad was based in Farmers Branch, Texas, which is a suburb of Dallas, Texas and eleven miles from my home. Ironclad manufactured high performance gloves for the automotive and construction industries. The company executives artificially inflated the company’s earnings by recognizing revenues in the quarter before the revenues were actually earned. Starting in the fourth quarter of 2015, Ironclad recognized more than $3 million dollars in revenue for more than 50 orders that were processed on the last day of the quarter but were not shipped until after the quarter ended. In other words, sales for items that were still in the warehouse days after the quarter ended were included in revenue for that quarter. The other $3 million dollar of fraud resulted from fraudulent accounting entries — booking revenue for the sale of items that never occurred.

The fraud was disclosed in 2017, and the company filed for bankruptcy shortly thereafter. It was subsequently acquired by Brighton Best International. The case has not yet gone to trial.

Heller, M., (2020). Ironclad executives accused of $6M accounting fraud. Retrieved from https://www.cfo.com/fraud/2020/04/ironclad-execs-accused-of-6m-accounting-fraud/