Ethics or Employment?

How One Accountant Chose Morals over Money

By By Gerard Field, CFE, CPA

Editor’s note – With the exception of Frank, the per diem accountant, the author has changed the identities of the individuals and companies involved in this case.  

My surprise first encounter with fraud began with a search to find a better job. It ended with losing my new position, but keeping my integrity and CPA license intact.

The job opportunity looked great. It was a finance manager position with an airline food catering company (AFC) that was publicly traded in the United Kingdom. Essentially I would be the chief accountant of the company’s U.S. subsidiaries (AFC Subs), which consisted of six entities. It would be more money, closer to home, and the work hours wouldn’t be too bad. All the things a guy with a growing family could want. In the interview, AFC Subs management seemed pleasant, and the consolidated financial statements of the subsidiaries appeared to be in good health. The decision was easy. I accepted their offer.

I joined the company just in time to close the books for October. Obviously, I requested the prior month’s financial statements, but, surprisingly, the controller couldn’t produce the balance sheet. Consequently, we had to construct the October income statement using estimated financial data gathered throughout the operation. We were able to publish a monthly flash report – or profit and loss statement – to the U.K. parent just in time. Well, I should’ve known by this point that something was drastically wrong. As an accountant it was apparent to me that AFC Subs didn’t maintain the most basic accounting records – a sure sign that the internal control structure at AFC Subs was nonexistent.

Financial Statement Fraud 

Over the next few months, with the help of an outside computer consultant who specialized in the accounting software used at ACS Subs, we began reconstructing the financial statements. The software was a cumbersome DOS-based application and was probably the reason why I didn’t receive a balance sheet when I asked for it. The consultant recommended that we use compatible software that would allow me to extract the period-ending balances by general ledger account and by entity, and download them into a spreadsheet. After several days of scripting the macros to extract the data, we were able to compile the consolidated financial statements for all six entities.

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