A Repeat Offender of Corruption: South MunaiGas Case Study

Abstract

Fraud is a serious and growing international problem, and can greatly affect a company's performance. The current case highlights the impact that culture can have on corporate corruption through the culture of a specific organization, as well as through the broader culture of a society. In this case, Russian NorthOilService (NOS) acquired 98 percent of the shares of the near-bankrupt Kazakh drilling company, South MunaiGas (SMG) in 2007. NOS management realized that SMG's weak financial standing was caused by corporate fraud and corruption, among other factors. Unfortunately, NOS was unable to prevent the new management team of SMG from committing fraud, despite NOS's anti-fraud efforts after acquisition. This actual case study focuses on the accounting and other frauds perpetrated by the SMG management team and the anticorruption measures implemented by NOS. It addresses fraud, bribery, corruption, and misappropriation of assets through inappropriate procurement procedures, in a cultural environment differing substantially from U.S. corporate contexts. This case is suitable for use in auditing, corporate governance, and fraud examination courses.

Elucidating corporate governance’s impact and role in countering fraud

“…Morgan and Burnside (2014) discuss the fraud case of Olympus Corporation in Japan and indicate that an unethical corporate culture increases the risk of fraudulent financial reporting. Similarly, Reddic et al (2017) analyse the Russian North Oil Service fraud case and conclude that unethical corporate culture increases the risk of corruption and other types of fraud. Shi et al (2017) find that when top managers face more stringent external control mechanisms, in the form of activist shareholders, the threat of a takeover or zealous securities analysts, they are more likely to engage in financial fraud.…”

Annual Editor Report

“…Also included is the first instructional case that we have published (Reddic, Shelton, and Shmagel 2017). I expect soon to publish other cases.…”

Derterminan Kualitas Opini Audit Pemerintah Daerah

“…Ini berarti ukuran pemerintah daer ah dapat menyebabkan lemahnya sistem pe ngendalian internal yang selanjutnya akan berdampak pada opini audit. Selanjutnya, Pearson (2014) dan Fan (2012) mengutara kan bahwa opini merupakan cermin dari pengendalian pemerintahan atas pengelo laan keuangan, yang berarti pula menja di cerminan atas akuntabilitas, integritas, legimitasi, dan konsep value for money enti tas sektor publik (Elder, Lowensohn, & Reck, 2015;Pahlevi & Setiawan, 2017;Reddic, Shelton, & Shmagel, 2017).…”