5 Major Corporate Fraud Cases: Red Flags & Lessons for Early Detection
Corporate fraud costs organizations an estimated 5% of annual revenues globally, representing over $5 trillion in losses according to the Association of Certified Fraud Examiners (ACFE). Yet here's the sobering reality: more than half of these cases (51%) could have been prevented.
The ACFE's research reveals also that 32% of occupational fraud occurs due to the absence of internal controls, while another 19% succeeds through circumventing existing controls. This means that with robust, automated monitoring systems, the majority of fraud schemes would trigger alerts before causing significant damage.
During Fraud Awareness Week, we analyzed five high-profile corporate fraud cases spanning different industries and fraud typologies. Each case demonstrates a critical lesson: the red flags were there, hidden in the data. What was missing wasn't information: it was continuous, automated monitoring capable of detecting anomalies in real time.
From financial statement manipulation at Circor International to procurement fraud at Apple, revenue recognition schemes at Under Armour, fabricated sales at Luckin Coffee, and bribery at Petrofac, these cases share a common thread: they left digital footprints that automated controls could have detected.
This article examines what went wrong in each case and, more importantly, identifies the specific automated controls that would have raised red flags before the fraud escalated.
Case #1: Circor International – Financial Statement Manipulation
The Cash Illusion: How a Finance Director Falsified Bank Reconciliations
The Facts:
Between 2019 and 2021, the Finance Director of Pipeline Engineering, Circor's UK subsidiary, falsified local financial statements by manipulating bank reconciliations, fabricating bank confirmation documents, and altering accounting entries and certifications. These manipulated figures were then consolidated at Group level, distorting the company's published financial results.
A single individual managed to deceive management and auditors for nearly two years. The SEC charged Circor with internal control failures, notably in bank reconciliation processes and access to accounting systems, but imposed no penalty due to the company's voluntary disclosure and swift remediation measures.
Red Flags That Should Have Been Detected:
- Accounting entries posted outside normal working hours or unusually clustered at month-end
- Bank reconciliations systematically adjusted without appropriate justification
- Manual access to accounting parameters that should have been locked and automated
- Absence of automated purchase order–receipt–invoice reconciliation (three-way match)
- Abnormal KRI movements in the subsidiary compared to group-level trends
The Lesson:
Accounting fraud isn't always sophisticated. What makes the difference is the ability to monitor transactions continuously and exhaustively. Group-level internal control must be able to detect anomalies coming from subsidiaries, either directly or through cross-entity comparisons. A simple KRI comparison monitoring the cash-to-earnings ratio at the entity level would have automatically triggered an alert.
Case #2: Apple – Procurement Fraud and Vendor Collusion
When the Apple Falls Close to the Supplier: A $17M Fraud Scheme
The Facts:
From 2011 to 2018, an Apple buyer orchestrated a fraud scheme worth more than $17 million with the help of two colluding suppliers: inflated invoices, fake receipts, and even the resale back to Apple of components stolen from Apple's own inventory.
The secret recipe? A broken segregation of duties (SoD), complicit vendors, and operational flows that were never reconciled.
Red Flags That Should Have Been Detected:
- Missing three-way match: invoices without purchase orders and/or without corresponding goods receipts
- A single user holding rights over purchase orders, goods receipts, and payments
- Newly created vendors receiving unusually large or rapid payments
- Repeated and unexplained replenishment of identical components
- Bank-to-P&L postings bypassing vendor subledgers
- Frequent entries on suspense or clearing accounts related to the procure-to-pay (P2P) process
These controls should have been complemented by automated vendor-risk monitoring: country risk, vendor age, reputation, activity patterns, frequency, and volumes.
The Lesson:
Theoretical segregation of duties is meaningless without real-world monitoring of how it can be bypassed. Fraud hides in operational flows (orders, receipts, payments) long before it reaches the general ledger. It cannot be detected if controls are limited to journal entries or trial balances. When anomalies are detected, automated workflows with centralized supporting evidence enable operational teams to react immediately and document their analysis.
Case #3: Petrofac – Bribery and Commercial Agent Corruption
Deals Greased with Bribes: Corruption in Middle East Contracts
The Facts:
Between 2011 and 2017, Petrofac paid bribes through commercial agents and false invoices to secure major contracts in the Middle East. Although instructions were given by more senior executives, none had been formally prosecuted at the time of sentencing. The financial penalties were calculated based on the actual profitability of the contracts involved, with some of them even loss-making.
Red Flags That Should Have Been Detected:
- Postings to third-party accounts located in high-risk jurisdictions
- Appointment of commercial agents without a robust validation process (insufficient due diligence)
- Lack of effective oversight by management over agent activities
- Payments for services without a corresponding purchase order or receipt
- Unreconciled or unusual payments within "high-risk" third-party categories
- Recurring amounts posted to "consulting" or "commission" accounts with atypical suppliers
- Purchase orders deleted or altered shortly after invoice approval
The Lesson:
Corruption schemes always leave detectable footprints. Anti-corruption compliance (Sapin 2, FCPA, UKBA) cannot rely solely on after-the-fact accounting checks. Continuous monitoring of third-party governance (due diligence, validation, supervision), paired with operational controls, is essential and fully aligned with recommendations from anti-corruption agencies like France's AFA (Agence Française Anticorruption).
Case #4: Luckin Coffee – Fabricated Sales and Financial Statement Fraud
A Brew Stronger Than Expected: $300M in Fake Revenue
The Facts:
In 2019, Luckin Coffee, the "Chinese Starbucks," served up more than $300 million in fabricated sales and created $190 million in fake expenses to balance the books. All of it enabled by related-party companies, fake orders, and manipulated reporting.
Red Flags That Should Have Been Detected:
- Clear inconsistencies between reported sales and corresponding cash flows
- Sales growth without any increase in in-store customer traffic
- Supplier-creation anomalies: newly created vendors with massive volumes, related-party entities, minimal real activity, or missing contractual documentation
- Large volumes of manual postings on order-to-cash (O2C) and procure-to-pay (P2P) cycles
- Lack of segregation of duties on both O2C and P2P processes
These anomalies would have been visible through cross-checks applied continuously on 100% of sales, cash, and inventory transactions. The mismatch between revenue growth and inventory movements (raw materials, packaging, consumables) should have been impossible to miss.
The Lesson:
Sophisticated fraud cannot be detected by reviewing cycles in silos. Cross-cycle correlation and anomaly matching reveal inconsistencies and direct attention to high-risk areas. When sales explode without corresponding increases in cash or purchases, it's a major red flag.
Case #5: Under Armour – Revenue Recognition Manipulation
Back to the Future: Pull-Forward Revenue Schemes
The Facts:
Under Armour was sanctioned by the SEC for artificially boosting its quarterly revenue by pulling forward future customer orders without disclosing this practice to investors. No fake sales, no fabricated invoices, and no fraudulent journal entries—but a serious failure in transparency obligations: a commercial strategy that distorted the market's perception of the company's true financial health.
Whether or not customers agreed to the accelerated shipments, the pull-forward practice leaves footprints that controls can detect.
Red Flags That Should Have Been Detected:
- Date inconsistencies between purchase orders, shipments, and invoicing
- Modifications to customer orders inside the ERP
- Abnormal increases in specific customer balances in the aged receivables report
- Provision accounts for unbilled revenue never cleared or cleared late
- Unusual spikes in end-of-quarter orders (detectable through KRIs)
The Lesson:
Cut-off manipulations always leave traces in the system, even when the underlying sales are genuine. Controls must be able to identify timing anomalies: end-of-period order clustering, atypically early shipments, and gaps between historical patterns and the quarter's revenue-recognition behavior. Automated controls directly connected to the ERP, combined with a collaborative workflow module for comments, supporting documentation, and approvals, would have enabled real-time detection and resolution of these anomalies.
From Detection to Prevention: Building a Culture of Integrity
The five cases explored in this article demonstrate that with the right automated controls, these frauds could have been detected far earlier. But tools alone aren't enough. Several cases reveal deeper cultural gaps.
Implementing continuous monitoring sends a clear signal: your organization takes oversight seriously. When vigilance is visible, fraud becomes harder, perpetrators think twice, and integrity becomes part of the culture.
At Eye2Scan, we help internal audit and control teams make this shift. Our platform integrates directly with ERP systems to monitor 100% of transactions and automatically detecting anomalies across accounting, procurement, sales, and logistics. Beyond detection, we help you build the visible control environment that deters fraud before it starts.
Prevention begins with the right tools and the right message.