Fraud and Tone at the Top

642 Words3 Pages
“Fraud and the Tone at the Top” “Fraud and the Tone at the Top” is a case which demonstrates the organization crime, occupational fraud and abuse. This case is a very good example where individuals and organizations involve in different crimes that are in a lot of social and financial pressure. In this case, Mr. Walt Pavlo who was a senior manager of MCI commits fraud with lack of top managements’ supervision and effective leadership in an organization like MCI/WorldCom. In this case there were multiple internal control weaknesses that allowed Pavlo to carry out the fraud and the different tricks he used to cover the whole scam. As described in this case, MCI falsified its financial statements for many years. Walt Pavlo, who was in charge of accounts receivable for the company allowed to control the Accounts Receivable system because he was the creator and developer. The lack of segregation of duties took place at MCI because the same employee was able to receive payments, update accounts receivable records and/or reconcile the company’s bank account. In the case of Walt Pavlo, he felt extreme pressure from his superiors to meet revenue projections. The employees and executives of MCI similarly knew where the numbers needed to be in order to meet those projections. In addition, they would meet to discuss different ways to manipulate the records so that it looked like MCI was living up to analysts’ beliefs. The compensation and incentive may possibly encourage Mr Walt for unethical and illegal behavior. In Pavlo’s case, also to his annual salary, he was eligible for thousands of dollars in stock options each year if he was able to come across his financial targets. He knew there was a financial incentive for cooking the books, so he manipulated the numbers. This helped Mr. Walt for his financial improvement and kept his bosses happy at the same time. Anyone in the
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