¶ … internal control weaknesses that existed at MCI that contributed to the commission of accounting fraud
The internal control weaknesses that existed at MCI that contributed to the commissioning of the accounting fraud was related to the very fact that Pavlov had the ability and access that allowed him to manipulate the account receivable system. Since he helped in the creation of the account receivable process, he was very ware of the system's strength and weaknesses as well as how to exploit them by manipulating the system (Lyon & Tocco,2007).He was therefore able to fraudulently receive payments, update as well as manipulate the account receivable records. This allowed him an opportunity of defrauding the firm and its clients by embezzling the funds to offshore accounts.
The exact fraudulent practices and tricks that Pavlo and his co-conspirators engaged in included the following:
The identification of the account receivables that were about to be written off and their subsequent conversion into notes receivables. In this way, the expenses were never touched while Assets were created on the balance sheet.
ii. The use of the unapplied cash in the masking of bad debt as well as slow payments. This was coupled with the allocation of some huge amounts of money to bad receivables and delinquents all of which made the expenses that are related to the earlier mentioned write-off of the receivables not to appear or hit the income statement.
iii. The use of "Placeholder credits." This means that MCI was made by Pvlov to call its clients regarding their account receivables that were overdue....
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