Essay About Recorded Expenses And Internal Control

The Fraud of Livent Finance
The fraud of Livent finance account started from 1990, when Garth Drabinsky and Myron
Gottlieb operated a kickback scheme with Livent vendors. In those four years, Drabinsky and
Gottlieb received 7 million in kickback. From the internal control, Livent should have separate
responsibility for related operation. The supply purchase process of the company should be
divided among more people to prevent receiving money from kickback. Because the lack of
separate responsibility, Drabinsky and Gottlieb can face directly to the vendors without having
people checking the accounts in the middle. From the external control, company vendors should
be changed from time to time to prevent the connection between employees and vendors. If the
vendors were different every year, it would be hard for certain employees in the company to
receive kickback.
The second fraud is when the company couldn’t achieve the quarterly earning target,
Drabinsky and Gottlieb directed Livent’s accounting staff to do false account. They erased the
recorded expenses and liabilities, reduce the periodic amortization charges and debited salary
expenses and other operating expenses. From internal control, Livent should have rotating
duties to prevent long-term employees cheating on the accounts. If the duty rotation were
applied to the company, it would be harder for Drabinsky and Gottlieb to control the group of
accounting staffs. Also, there should be another group of people attesting all the accounts.
Separating the operation would provide the company accounts more security. Having a certain
group