Financial statement fraud
An audit team discovered $4 million in questionable adjustments, which appeared to result in aggressive revenue recognition, and moving unsupported receivable balances to reduce miscellaneous payables. PricewaterhouseCoopers (PwC) was engaged to investigate this potential financial statement fraud at the entity's US and Mexico locations. By the completion of our work, what started out as a $4 million adjustment grew into nearly a $100 million restatement.
Our investigation included interviews, public record searches, electronic data mining, and a detailed journal entry review using PwC's proprietary General Ledger Tool and e-discovery. We uncovered a variety of irregularities in numerous areas, including fake inventory, unrecorded liabilities, inappropriate capitalization of fixed assets, inappropriate provisions for bad debts, and unsupported manual journal entries used to inflate income.
Money laundering/financial statement fraud
PwC was engaged by counsel representing the board of directors and shareholders of a Latin American financial institution to assist in conducting an investigation to determine the scope of the misappropriation as well as the methods and schemes used. The investigation has uncovered an elaborate money laundering and financial statement fraud scheme involving several "off-book" bank accounts used for unauthorized cross-country transactions, as well as several fictitious accounting entries. In addition, several inter-company transactions were used to misrepresent the books and records of the institution and its related entities. Key to piecing together all the evidence was the computer recovery of accounting data and over 50 hard-drives with related files and emails. The estimated embezzlement is in excess of $42 million.
Asset misappropriation
PwC conducted an extensive investigation for a US Fortune 200 company at its manufacturing plant in Ecuador, responding to an anonymous letter. Our investigation determined that the fraud was perpetrated over an eighteen-month period resulting in the theft of $30 million in cash through various schemes including bribery of government officials, vendor kickbacks, ghost employees and extensive conversion of company funds for personal use by the general manager and about ten other managers. Computer recovery of accounting data from destroyed PCs was critical to piecing together this very complex fraud. The forensic investigation also involved reconstruction of information from partially burned and mutilated documents.
Anti-corruption/Foreign Corrupt Practices Act
PwC was retained by a multinational company to assist outside counsel in the investigation of a potential FCPA violation. The company’s operations in Asia contracted with numerous Chinese state-owned entities ("SOEs") for product development. Certain travel issues arose when those contracts appeared to be for vacation and sightseeing purposes for individuals of the state-owned entities. PwC was commissioned to conduct interviews, review contracts, and perform disbursement testing at the company’s operations throughout Asia and the US.
PwC identified travel costs for numerous delegations to multiple cities in North America. There was no indication that the costs incurred were for business-related activities.
Anti-corruption/Foreign Corrupt Practices Act
PwC was engaged by a law firm in response to an allegation of an FCPA violation at their client's Middle Eastern operations. The purpose of this investigation was to determine whether employees of the client made improper gifts and inappropriate drug sample distributions to doctors at government-owned hospitals.
Procedures performed by PwC during the engagement included:
- Interviewing various individuals
- Performing disbursement testing
- Testing drug sample distributions to government-employed doctors
After performing these procedures, PwC was able to determine that evidence existed indicating that their client's employees gave both improper gifts and excessive drug samples to government-employed doctors.
