Automation Company Fraud Case Study

a) The internal control practice of separation failed in this case based on several practices within the organization. Even though, the controller was making the accounting error and the CEO and CFO were aware. The Sarbanes-Oxley Act will hold management, the board of directors, external auditors, and the oversight board, accountable. The action of the controller and the CEO, CFO not establishing clear lines of authority and responsibility, do not only affect management.

As described in our reading, establishing clear lines of authority and responsibility was overlooked in the Automation company example. Turning a blind eye makes the CEO and CFO just as guilty as the controller in this case.

The board of directors, external auditors can

When hiring for leadership positions, having someone with the fortitude always to do what is correct even when the results are not favorable is why management and good board members are in such demand.

b) All three elements of the fraud triangle existed in the Automation Company fraud example. The availability of and opportunity, the pressure that lead to an incentive, and the ability to rationalize the fraud existed in this case

Financial accounting often is prepared for use outside of the organization. Examples of financial accounting forms are the income statement and the balance sheets. Preparing financial accounting information is often completed quarterly or annual basis with strict accuracy. The financial accounting information is often used to secure loans, report earnings to shareholders. Financial accounting information uses GAAP general accepted accounting principles too often provide the past performance of a company.

Managerial accounting is often internal and never given to anyone outside the company. The managerial information is often used to run the day to day business and make decisions quickly. Managerial accounting provides lower level managers the information needed to take action. This accounting principle does not often follow regulated accounting principles and if incorrect do not have the same consequences as financial or reported accounting. The managerial accounting principle also can be used for different areas of the business. Sales and marketing may have a different managerial process than