Transforming Corruption: South MunaiGas Case Study

• In Event: Cases and Teaching Pedagogy for Auditing and Fraud

Abstract

In 2007, Russian NothOilService (NOS) acquired 98 percent of shares of Kazakh drilling company, South MunaiGas (SMG). This included the President/CEO, shares as well. Due to the fact that NOS was unfamiliar with SMG’s drilling operations, it decided to retain SMG managers to reorganize SMG’s operating processes. Under the assumptions that the bankruptcy of SMG was not based on corporate corruption, initially, NOS was unable to prevent the management team of SMG of committing fraud, AGAIN. This case study focuses on the forensic accounting fraud allegedly perpetrated by the SMG management team and the anticorruption measures implemented by NOS. More importantly, this case addressed all three of the basic fraud types, corruption, misappropriation of assets, and fraudulent financial reporting. In order to detect fraud and corruption activities being presented in this case, a basic understanding of forensic analysis and the importance of fraud accounting are needed.

Authors

• Georgiy Shmagel, DePaul University

• Willie Dion Reddic, DePaul University

• Sandra W Shelton, DePaul University