Greed at the top : fraud and the failure of oversight at Adelphia Communications Corporation and Tyco International Ltd

Abstract

In this paper we have taken a good look at the concept of fraud, using theory and examining frauds that have happened in two large companies. The main purpose of this paper was to gain insight on the concept of fraud, to see why fraud is committed and who has responsibility to prevent fraud. We have seriously considered the auditor’s job, to see what part he plays in preventing fraud. We have found that fraud is somewhat common in the business world and think it probably will continue to be a serious problem. In the beginning of this century several major accounting scandals were revealed. This publicity has prompted increased focus on the problem of business fraud. In response, a new regulatory framework is developed, we think that this framework is good, but it will likely not be sufficient to prevent fraud entirely. In this paper we have looked at fraud that involves management, thinking this kind of fraud is more difficult to prevent than fraud committed by employees. When management commits fraud, it is often committed by strong personalities. These persons are often very hard to stop with rules. If they have the desire to commit fraud, they can often find ways to break rules. The auditor has a certain responsibility to prevent fraud, but we have come to think that he can not be held responsible if he is doing his job properly. There are always many other people in position to detect fraud, employees and the Board of Directors. They can be good resources in the fight against fraud. We think that these parties can find support for their effort to prevent fraud, not only through formal structures of regulations but also from increased awareness of how to recognize circumstances that give opportunity for fraudulent actions.