Acc499 Written Assignment - 1534 Words

Fraud at Electronic Game Card, Inc. Krista L. Farmer Dr. Randolph A. Stanley, Professor ACC499 – Accounting Undergraduate Capstone November 17, 2012 Fraud at Electronic Game Card, Inc. Discuss the nature of the fraud and the impact to the company as a result of the fraudulent activity. Electronic Game Card Inc. develops, produces, and markets electronic, credit card sized games to the casino, lottery, toy, game, education, and promotional industry worldwide. Chief executive officer Lee Cole and chief financial officer Linden Boyne secretly funneled millions of shares of the company’s stock to entities in Gibraltar which they secretly controlled. Those entities then sold off the stocks and had the funds†¦show more content†¦It is unclear as to how the cover-up was perpetrated. The day-to-day processing of documents would likely have been completed by lower ranking employees, who may or may not have been aware of the situation. At times, lower level employees choose to do what is asked, even if they feel that something is wrong. They point the blame for why a certain procedure was followed on their supervisors as they fear they will lose their jo b. It is management’s responsibility to set the tone of ethical behavior within the company. Mr. Lee’s and Mr. Boyne’s lack of integrity and honesty could have filtered down to the employees, who chose to ignore the unethical behavior. Discuss the impact to the company or brand as a result of the fraudulent activity. On February 10, 2010, the company postponed a conference call that was meant to discuss vital internal issues within the company, which created an instant sixteen percent drop in stock price (Shareholders Foundation, 2010). On this same date, they filed Form 8-K with the SEC, stating that their independent auditors, Mendoza Berger and Company, LLP, had withdrawn its audit opinion for the years ending December 31, 2006, 2007, and 2008 (U.S. Securities and Exchange Commission, 2010). On April 8th, 2010, the company announced that PricewaterhouseCoopers LLP had begun an investigation into the possible cause of the