Southern New Hampshire University
Module One Homework
Find an ar cle online that addresses fraud within a company (for example: "Bookkeeper caught embezzling from local plumbing company"). Respond to the following ques ons. Please answer in paragraph format in one to two pages. Include a link to the ar cle at the end of the paper.
The ar cle I decided on is about six people that reside in Louisiana who used several Shell Louisiana Companies that had no assets to defraud a merchant cash advance company out of Georgia. For an MCA company it is a normal occurrence to help a company in a me of need. This would not have sent any red ags to them since the men were ac ng on the legi mate business of the Shell Louisiana Companies This case is s II under inves ga on.
1. What items on the balance sheet were a ected by this fraud?
For the shell companies it did not a ect anything in their internal data, because the money was requested in their names but not ever actually added. However, It did create a debit it their name for the money borrowed at the MCAC in Georgia. For the Georgia company it was as a normal transac on that was defaulted on. It a ected their Cash, Funding through Syndicates, Collec ons through Syndicates, Accounts Receivable, MCA revenue and Bad debt expense.
ff. Based on the seven elements of internal control from the lecture, discuss what controls might have been missing.
It's really hard to say that they were missing any controls in this situa on. The shell companies that were used are legi mate companies with the necessary paperwork to be a running business. Knowing this the McA probably used all seven levels of controls but feel short on the seventh element. "A sta that can provide independent veri ca ons. The existence of an internal audit sta , or other means of checking, may be helpful." (Braggs, ff011) For the 6 men to be able to act on behalf of the shell companies, they would need to be a part of the business. A successful veri ca on sta would have been able to discover this.
3. What steps could have been taken to prevent the fraud that was perpetrated?
To prevent this type of fraud, the MCA company should have a be er determina on process. It shouldn't be as easy as having a business id to get a cash advance. The MCA sta should be more vigilant on who is applying for funding and making sure they have completed their checklist of due diligence. Even then it is hard to determine if the person or persons are well informed on the
prac ces of the MCA's quali ca ons process.
Southern New Hampshire University Link to Ar cle: h ps:flflinsurancenewsnet.comfloar cleflsix-people-charged-with-wire-fraud-conspiracy-and- money-laundering-in-new-orleans
References: Bragg, Steven M. (ff011). The controller's func on: The work of the managerial accountant. Hoboken, New Jersey. John Wi