Someone was CFO at two companies and the auditors only checked the year end balance against his falsified statements. So he transferred money from the other company temporarily to make them match.
"""To avoid detection, Morgenthau doctored African Gold’s monthly bank statements
by, for example, deleting his unauthorized transactions and overstating the available account balance in any given month by as much as $1.19 million. [...]
Morgenthau knew that African Gold’s auditor would confirm directly with the bank the actual account balance as of December 31, 2021, as a part of its year-end audit. [...]
Morgenthau deposited more than half a million dollars of Strategic Metals’ funds into African Gold’s bank account on December 31, 2021, because he knew that African Gold’s auditor would confirm the account balance as of that date, in connection with African Gold’s year-end audit.
"""
Interesting. I guess that is the inherent flaw of all audit methods which predominantly check the paperwork, while rarely venturing out into the real world. With sufficiently bad actors, the whole paperwork can be doctored and completely untethered from reality. Such bad actors need to only make a plausible Potemkin village for the controllers in selected spots where they are expected to verify if reality matches presented paperwork.
Enron was doing similar trick by selling buildings to another business entity, and buying them back after the audit. I might not have all the details correct but it was the same type of shenanigans. :-)
Someone was CFO at two companies and the auditors only checked the year end balance against his falsified statements. So he transferred money from the other company temporarily to make them match.
"""To avoid detection, Morgenthau doctored African Gold’s monthly bank statements by, for example, deleting his unauthorized transactions and overstating the available account balance in any given month by as much as $1.19 million. [...]
Morgenthau knew that African Gold’s auditor would confirm directly with the bank the actual account balance as of December 31, 2021, as a part of its year-end audit. [...]
Morgenthau deposited more than half a million dollars of Strategic Metals’ funds into African Gold’s bank account on December 31, 2021, because he knew that African Gold’s auditor would confirm the account balance as of that date, in connection with African Gold’s year-end audit. """
https://www.sec.gov/litigation/complaints/2023/comp-pr2023-1...