Accounting Problems: Corporate Fraud Schemes

Corporate Fraud Schemes
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Corporate Fraud Schemes
When Volkswagen decided to dupe its consumers, world governments, and international environmental organizations, it set in motion a crisis that lasted more than ten years. Volkswagen is one of the top car manufacturers in the world. Its unique and user-friendly cars ensure that it retains a substantial consumer base in the market (Oldenkamp et al., 2016). However, in the early 2000s, one of the lead engineers and his team realized that they could use software to manipulate emission test results. The result was the manufacture and sale of millions of Volkswagen vehicles that did not meet emission standards. Environmental agencies do emission tests in different regions of the world to ensure that cars' emissions do not exceed the required percentage. Despite this initiative being good for the environment, it is particularly costly for car manufacturers who have to invest in the latest technology and engineering materials to ensure that their cars meet the required emission standards (Halbert & Ingulli, 2020).
Volkswagen's software to cheat emissions tests was only applicable in test mode (Oldenkamp et al., 2016). When the car was driving, usually, the software did not work, and this is how mechanical engineering researchers in the United States (U.S.) discovered that Volkswagen had been cheating. By the time the discovery was made, Volkswagen had sold more than 500,000 such vehicles in the U.S. and at least 10 million more worldwide (Halbert & Ingulli, 2020). The impact that these cars had on the environment is significant. When a vehicle exceeds the standard emission requirements, it produces a pollutant, which has often been cited as a leading cause of lung cancer (Oldenkamp et al., 2016). Depending on the driving style and load, pollution is likely to be high or low. However, in Volkswagen's case, there was no disputing the impact that its vehicles had on the environment. Furthermore, the number of cars mentioned in the emissions scandal was more than 10 million.
Volkswagen's scandal also had a significant impact on the company's shareholders and creditors. With the company having to recall millions of cars, it set aside 6.7 billion euros to cover costs (Hotten, 2015). In addition to this, it had to pay at least $18 billion in fines. This resulted in Volkswagen posting its first-ever quarterly loss in fifteen years (Hotten, 2015). Due to the loss suffered and the significant damage to its reputation, Volkswagen sustained a decrease in its share price in 2015. The result was the departure of several shareholders in the company. Also, significant creditors had to halt their business relationships with the company due to its reduced creditworthiness.
Financial forensic investigators are essential because they point out financial errors and performance misrepresentation in a company (Kranacher et al., 2011). A financial forensic investigation would have detected fraud at Volkswagen before it continued for years. The company to have manufactured cars that met specified emission standards would have had to incur additional costs. The company's managerial acc...