Internal Controls Assignment
Read Livent, Inc. An instructional Case by Michael C. Knapp and Carol A. Knapp.
Identify weaknesses in internal and external control mechanisms
Writer a one-page (500 words minimum ) letter to the Livent board of directories from the point of view of a consultant, recommending ways that internal and external control mechanism could be improved. Note: when offering recommendations, be specific and support your recommendations with best practices and analysis and reference to test and materials.
Dear Members of the Board:
Based in light of recent events at Livent Inc. as an accounting consultant I would like to offer some recommendation to avoid future fraud through internal and external controllers.
I will start with some counsel on picking valuable personal for the company from employees to board members. Issues can be resolved by implementing rules in initial operations and contracts to avoid friends and family from influencing the majority of company interests. Many times appointing close friends or personal from auditing companies to major positions is the cause for red flags or source of fraud. For example: hiring Maria Messina a prior audit from Deloitte & Touche to CFO position at Livent, which is an immediate cause of conflict of interest for an individual to perform their job with the discrepancy. A similar scenario was repeated with former KPMG’s due diligence accounting records investigator Robert Webster who was offered a position in Livent after Ovitz's 20 million dollar investment and acquisition of common stock and control of the board of directors. Many of these issues could have been avoided through proper impersonal engagement between auditors and company officials. The auditors intended for external control were unsuccessful. Typically audit companies should be changed every few years to avoid monetary partnerships.
Many of the initial internal controls assumed by the Livent Inc. accountants were...