Fraudulent money transfers to suppliers and top managers within group companies : a case from Turkey

Abstract

Three conditions of fraud arising from fraudulent financial reporting and misappropriations of assets are described in Section 5135.012 of the Canadian Institute of Chartered Accountants Assurance Handbook (The Auditor’s Responsibility to Consider Fraud and Error). These three conditions are referred to as the fraud triangle. The three corners are as follows: incentives/pressures, opportunities, attitudes/rationalization. Despite new laws and regulations, companies face pressures to meet short-term financial goals, creating a powerful motive for accounting fraud. The author of the present article discusses the case of a group company Volcano: the company belonged to a group which was taken over by the semi-governmental Saving Deposit Insurance Fund as a consequence of the failure of the group’s bank to meet its obligations. The case shows how a cash-rich company’s resources are drained to outsiders and group managers as a result of its manipulative top management.