Adelphia Case Study

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Control Activities: Only a few control activities were established for Adelphia. Large sums of money from Adelphia and various subsidiaries were merged together that the Rigas family had access to and could withdraw from at any time. There was not anyone who investigated such withdrawals and if it was necessary for the operations of Adelphia. This, ultimately led to earnings being inflated known as, “co-mingling” (Adelphia Communications). Additionally, management had the ability to override various policies, in which they did. For instance, with cash transactions that exceeded one million dollars, Tim Rigas had to approve such cash transactions to his father John Rigas. With ineffective corporate governance in place (as mentioned above),…show more content…
Within Adelphia, there were assessments in regards to the company being over-leveraged. While knowing this, the Rigas family continued to work together and cover their tracks “to conceal the borrowings and inflate earnings” (Markon and Frank); rather than combating such issue of leveraging resulting in the fall of stock prices from the recession- in the late 1990s and early 2000s. Additionally, it seemed that employees and management of the company were ignorant to the fact of Adelphia being susceptible to such fraud. While many employees continued to add on to the fraud that the Rigas were committing, management did nothing to be able to stop such activity. They did not consider such activity or have controls set in place to detect such…show more content…
Due to such lack of monitoring, management continued to be unaware of such transactions that continued to impact the company negatively. This provided the Rigas family many opportunities to override controls since the lack of corporate governance enabled the decisions to be made by Rigas family without oversight. For example, the article “Adelphia Officials are Arrested, Charged with ‘Massive’ Fraud” discuses how Timothy Rigas had to limit himself to $1 million a month of compensation that was withdrawn from the company for personal use. All decisions were continuously made by such members of the family, in which case for Adelphia, was the team of management. With the lack of controls creating opportunity, they were free to do what they wished- which is something they took incredible advantage
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