Date of Graduation

5-2022

Document Type

Thesis

Degree Name

Bachelor of Science in Business Administration

Degree Level

Undergraduate

Department

Finance

Advisor/Mentor

Allee, Kris

Abstract

Fraud is a serious issue which carries significant implications. Fraud committed by top level managers is particularly grievous, as it ripples through a firm, harming the company’s shareholders, employees, and credibility, while posing a threat to individuals and society (Zahra, et al.). A common framework in auditing, the fraud triangle, outlines three factors that if present, increase the risk or enable fraud to occur. The three factors are incentive, opportunity, and rationalization to commit fraud (Barlow).

In 2018, the Securities and Exchange Commission (SEC) charged Elizabeth Holmes, founder and CEO of a supposedly groundbreaking health tech company, Theranos, with what they referred to as “massive fraud” in a press release (“Theranos, CEO Holmes”). Following, in 2020, the United States charged Holmes with twelve counts of conspiracy and wire fraud (United States District Court for the Northern District Sa.).

In consideration of the effects of fraud committed by top level managers, this thesis serves to offer an insight into how corporate fraud occurs via a case study on Theranos. An overview of the fraud triangle is first presented to discuss to how fraud is often carried out by top level executives. Analysis of the legal proceedings brought against Holmes will provide insight and understanding to the true scope and effects of fraud committed under her operations at Theranos. Finally, application of the fraud triangle will provide a narrative of how the conditions and management at Theranos enabled fraud to occur.

Keywords

Theranos, Fraud, Fraud Triangle, Elizabeth Holmes, Board of Directors, Corporate Governance

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