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ACC 564 Assignment 3 Fraud in the AIS Strayer University(USE AS GUIDE ONLY)
Fraud in th
During a span of more than five years, Sujata “Sue” Sachdeva stole nearly half the
company’s pretax earnings. The scheme was uncovered when American Express noticed her
credit card balances were being paid through large wire transfers originating from a company
bank account. Koss is the Milwaukee-based, mostly privately held small company that’s a
prominent global designer and marketer of stereophonic headphones. (Verschoor, 2011)
Sachdeva’s pleaded guilty to embezzling $34 million from her employer, an increase of
$2.5 million over earlier estimates. The six felony fraud counts carried a maximum penalty of
120 years in jail, but 15 to 20 years is appropriate under federal sentencing guidelines. Because
she cooperated with authorities from the very beginning of their investigation, the judge limited
her sentence on November 17, 2010, to 11 years in federal prison, plus restitution to Koss of $34
million. (Verschoor, 2011)
1. Based on the information you researched, assess the failure of the firm’s accounting
information system to prevent the related fraud/embezzlement.
The SEC charged that the company and its CEO didn’t maintain a system of internal
controls that would have reasonably assured accurate and reliable financial reporting. The scope
of the embezzlement scheme was significant compared to the company’s sales and retained
earnings, according to the SEC. In 2009—the first of two fiscal years and three subsequent
quarters that Koss restated as a result of the fraud—Sachdeva skimmed $8.5 million in corporate
funds on sales of $41.7 million and retained earnings of $17.1 million. Sachdeva and Mulvaney
hid their embezzlement through an accounting fraud. (Coenen, 2011)
Koss Corporation’s internal controls as of June 30, 2009 were not effective in that they
failed to timely detect and prevent the circumvention of the internal controls and procedures
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