The Technology Behind Accounting Fraud

from the easy-as-colored-markers,-copiers-and-scanners dept

The NY Times is looking at three big accounting frauds (two from years past, and the current Parmalat fraud) to see what technology was used to fool the auditors in each case. The findings suggest that there’s a lot more social engineering happening instead of really hiding the fraud. In each case, it looks like it’s just a question of presenting faked documents created with colored pens, copying machines or scanners. In each case, if the auditors had actually looked beyond the documents they were presented with, the fraud would have become apparent very quickly.

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Comments on “The Technology Behind Accounting Fraud”

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Enterprise System Spectator (user link) says:

Low tech fraud

From the NYT article:

“…most amazing part of the Parmalat fraud….auditors accepted at face value that Parmalat had 3.95 billion euros (then worth $4.1 billion) in a bank account in the Cayman Islands. They evidently failed to actually talk to the bank officer whose name was on the phony confirmation.”

I get annoyed with accounting system vendors that propose technology solutions to Enron or Parmalat problems. The frauds were low tech. So also the solutions do not lie with technology but rather with auditors simply willing to do their jobs.

Anonymous Coward says:

investiagor modius operandi

Most investigators are not geeks and are not intersted in finding technology based fraud because:

1 – it tends to be hard to find and verify
2 – it’s not how the investiagor usually works

With that in mind, I wonder how much technical fraud is executed on a daily basis, completely undetected.

As for Enron, I would argue that a lot of their initial fraud (manipulation of the energy market and attempting to corner other finite resource markets) that allowed them to operate “legitimately” was overshadowed by the days leading up to their eventual collapse.

Still, who the fsck cares if you can prove that they added 50cents per kilowatt hour to energy prices in a certain market just by shunting long-haul circuits around, when you can parade “bilked” mom&pop investors who lost “millions”.

One make for far better court room theater…

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