Woolex Mills
]Main Participants
Based on the eyewitness testimony and preliminary investigation, five notable members of senior management were alleged participants in WoolEx Mills’ fraud scheme involving financial irregularities. Four of the five members of senior management included: the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the Head of Manufacturing and Sourcing, and the Head of Sales. The fifth perpetrator’s position was not indicated in the fraud case study. Depending on the circumstances of the fraud case, more employees may have been involved in the perpetrating or concealing of fraudulent activity. As part of the company turnaround, the five members of senior management were suspended and only ethical individuals …show more content…
Pressures explain why fraud is committed and they are categorized as being either personal, professional, or financial. WoolEx Mills’ senior management felt the pressures of maintaining a healthy financial position and meeting shareholder expectations. Executives believed that there was no other way to meet these financial objectives by legitimate means. Opportunity consists of how perpetrators commit fraud. With the most power, WoolEx Mills’ CEO launched the financial statement fraud by delegating tasks to the remainder of the company. Senior management then utilized their knowledge to manipulate and conceal financial irregularities. Rationalization is the perpetrator’s reasoning for justifying his or her actions. WoolEx Mills’ senior management felt that creating fictitious revenues was the only way to keep the company afloat and the likelihood of getting caught was low (Krishnan & Shah 2015) (The Fraud Triangle …show more content…
Fraud symptoms relate to the participation or concealment of fraud. One of the most noticeable red flags was WoolEx Mills’ lack of internal controls, which significantly impacted the company. The lax internal controls stemmed from an ineffective management with a CEO delegating orders to commit fraud. Management also participated in kickbacks, but A&M suggested switching vendors would reduce costs by 5-10%. Fictitious revenues overstated Sales and Accounts Receivable with the latter negatively impacting WoolEx Mills’ cash flows. In addition to overstating Sales, the company neglected to report Sales Discounts or Sales Returns and Allowances. Further examination would be needed to determine the existence of the transactions. Finally, management continued to utilize outdated equipment and neglected to maintain the manufacturing plant (Krishnan & Shah 2015) (Fraud Red Flags
Based on the eyewitness testimony and preliminary investigation, five notable members of senior management were alleged participants in WoolEx Mills’ fraud scheme involving financial irregularities. Four of the five members of senior management included: the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the Head of Manufacturing and Sourcing, and the Head of Sales. The fifth perpetrator’s position was not indicated in the fraud case study. Depending on the circumstances of the fraud case, more employees may have been involved in the perpetrating or concealing of fraudulent activity. As part of the company turnaround, the five members of senior management were suspended and only ethical individuals …show more content…
Pressures explain why fraud is committed and they are categorized as being either personal, professional, or financial. WoolEx Mills’ senior management felt the pressures of maintaining a healthy financial position and meeting shareholder expectations. Executives believed that there was no other way to meet these financial objectives by legitimate means. Opportunity consists of how perpetrators commit fraud. With the most power, WoolEx Mills’ CEO launched the financial statement fraud by delegating tasks to the remainder of the company. Senior management then utilized their knowledge to manipulate and conceal financial irregularities. Rationalization is the perpetrator’s reasoning for justifying his or her actions. WoolEx Mills’ senior management felt that creating fictitious revenues was the only way to keep the company afloat and the likelihood of getting caught was low (Krishnan & Shah 2015) (The Fraud Triangle …show more content…
Fraud symptoms relate to the participation or concealment of fraud. One of the most noticeable red flags was WoolEx Mills’ lack of internal controls, which significantly impacted the company. The lax internal controls stemmed from an ineffective management with a CEO delegating orders to commit fraud. Management also participated in kickbacks, but A&M suggested switching vendors would reduce costs by 5-10%. Fictitious revenues overstated Sales and Accounts Receivable with the latter negatively impacting WoolEx Mills’ cash flows. In addition to overstating Sales, the company neglected to report Sales Discounts or Sales Returns and Allowances. Further examination would be needed to determine the existence of the transactions. Finally, management continued to utilize outdated equipment and neglected to maintain the manufacturing plant (Krishnan & Shah 2015) (Fraud Red Flags