How senior managers perpetuate accounting fraud? Lessons for fraud examiners from an instructional case

Purpose:  The purpose of this paper is to examine the risk factors that led to the Livent fraud, and the procedures that need to be taken by responsible parties to carefully investigate and address the incidents of misconduct.

Design/methodology/approach:  The paper combs through the chronology of events that led to the Livent fraud by looking at both primary and secondary sources. These sources made it possible to examine how the fraud was discovered, and the investigative steps that should have been taken to uncover the fraud.

Findings:  The findings indicate that a corporate culture which focuses on the bottom line coupled with weak to non-existent internal controls were the key elements that led to the Livent fraud. The findings also illustrate that when faced with declining profits, senior managers will go to any length possible to manipulate and falsify their company’s records.

Practical Implications:  The study opens an avenue for ordinary users of financial information to process the data and question the validity of the numbers presented by listed firms. Furthermore, if fraud information is available, similar research can be conducted to examine the tendency for companies with anomalous financial reports to commit fraud.

Originality/Value:  This is the first paper of its kind that attempts to build an anomaly detection model for Vietnamese listed companies.