And the Fraud Continues
Discuss the internal control weaknesses that existed at MCI that contributed to the commission of this fraud.
Fraud is an intentional deception, whether by omission or co-mission, that causes its victim to suffer an economic loss and/or the perpetrator to realize a gain (Kranacher, Riley, & Wells, 2010). Individuals who commit this crime sees this as a source to gain through deception as it principal technique. This crime has affected many organizations throughout the years and is usually committed by employees with no criminal background. These employees are seen respectable within the community and usually act alone such as the MCI case. Last, the employees who commit the fraud usually have been with the company for more than one year.
MCI internal control weaknesses existed due to the fact of not have a segregation of duty and having one individual to do multiple tasks. Walt Pavlo was able to manipulate the Accounts Receivable system in which he helped to create and develop. If the same employee is able to receive payments, update accounts receivable records, and reconcile the company’s bank account, he may be able to embezzle money for the company (McMullen, 2012). Walt Pavlo was able to commit fraud due to identifying accounts receivable that were going to be written off and converted them into notes receivable. His manipulation of the Accounts Receivable on MCI let him delayed the recognition of bad debt and uncollectible receivables that would have to be expensed on the income statement.
Identify and justify the approach you would take if you suspected fraudulent activity within an organization where you work.
The approach I would take if suspecting fraudulent activity would be to talk to a manager about it. I would tell them why I expect it, but would let management investigate the matter more into observing whether fraudulent activities are being made. I believe this manner should only be elaborated to with managers and not speaking to other co-workers would be a smart choice. I think the last thing anybody wants would to be pinpointed as the person to spreading a rumor around the company for calling someone out on fraud. However, when a red flag has been noted, someone should take the action to investigate the situation and determine if fraud has been committed. I believe the quicker it can be looked into the faster it can stop from these activities happening if being done.
Critique the ethical nature of Pavlo’s actions in this case.
Pavlo was one of the group managers at the MCI organization where he was responsible for collections billings for the carrier business segment. He was expected to provide a good example for the employees available