2) It is evident in the case that there multiple instances were a lack of internal and external control mechanisms allowed for such fraudulent activities to occur. In terms of internal control mechanisms, there was a clear separation of duties in the corporate hierarchy, however, it was unfortunate and a very rare situation where various members of the corporate structure collude and successfully commit large-scale fraud. Moreover, the internal control system lacked security systems, as the IT provider was able to manipulate the software by allowing the employees to post and delete data as they wished, without leaving a trail behind to hold someone accountable. Moreover, the lack of traces only weakened the abilities of the external control systems. Another major weakness in the internal control mechanism, which is absurd in my opinion and a rookie mistake if I may add, was allowing the company’s executives to be on the audit committee. This caused a clear conflict of interest and certainly defies the entire purpose of existence of the audit committee. This only allowed the fraud-committing executives to make things easily disappear and slide, or even eliminate doubts that the remaining auditors had.
Regarding external control weaknesses, Livent did have highly qualified auditing firms working for them. During the fraudulent times, Deloitte was the designated auditor. It was very difficult for Deloitte to do a good job auditing Livent as it was high risk. Livent officials and executives manipulated historical financial data, re-programmed software to delete traces of data manipulation, used kickbacks and bribery, developed a revenue-generating scheme, inflated revenues, understated expenses and depreciation, and more. The Livent fraud was truly very hard to catch. However, Deloitte did make very big mistakes. Firstly, Deloitte relied plenty on information given by management, rather than conducting their own investigations to the very last detail....