1. What internal control principles does it appear where violated at Netflix? 2.
ID: 2517428 • Letter: 1
Question
1. What internal control principles does it appear where violated at Netflix? 2. how makes Netflix have designed its internal processes differently to avoid the situation that arose with Mr. Kail? 3. Should Mr. Kail be held totally liable for this situation? Does Netflix have any degree of responsibility in this situation?
al-control-weakness-at-netflix-allowed-its-former-vp-of-it-operations-to-allegedly lings Review View HelpTell me what you want to do s. Unless you need to edit, it's safer to stay in Protected View. -receive-kickbacks-from-tec - Protected View - Saved te Enable Editing adlines What internal control weakness at Netflix allowed its former VP of IT operations to allegedly receive kickbacks from technology firms? In November 24, 2014, Netflix filed a lawsuit against its former vice president of IT operations, Mike Kail, alleging fraud, breach of fiduciary duties, and other charges. Here is an excerpt from the lawsuit filing in Superior Court of the State of California, Santa Clara County:. .During his tenure at Netflix, including as Netflix's Vice President of Information Technology Operations, Kail was a trusted senior-level Netflix employee. Kail's job responsibilities at Netflix included negotiating and executing contracts on behalf of Netflix to acquire IT-related products and services...approving invoices for payments that third parties would request related to IT products and services purchased by Netflix...after Kail approved such invoices, Netflix would pay the third parties for these approved invoices. Kail was a trusted, senior-level Netflix employee, with authority to enter into appropriate contracts and approve appropriate invoices. (See entire legal document at http://www.scribd.com/doc/24825959o/ Netflix-v-Kail.) Netflix is suing Mr. Kail for fraud, breach of fiduciary duties, and other actions. Mr. Kail was in charge of entering into and authorizing contracts for Netflix's tech vendors, which included two companies, Vistara IT and Netenrich (both founded /owned by AMr. Raju Chekuri.) At the same time Mr. Kail had his own company on the side called Unix Mercenary, which he did not disclose to Netilix.Explanation / Answer
Answer 1:-
In this case the segregation of duties is not proper. Only one individual has been authorise for entering contract and approving invoices
Answer 2:-
Netflix should have made sure that there are atleast two persons involved in the process and proper negotiations have been entered into with these companies in the interest of Netflix to ensure purchase at competitive rates.
Answer 3:-
No Mr. Kail is not to be totally held liable for this situation. There was a failure on part of Netflix as well in design of internal control system. As already discussed above had proper internal contol in place such situation would not have occured
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