We really do need some process where by the accounts of large companies are reconciled with reality. I understand completely that this is not possible for all the numbers investors want to see (Profit is made up after all). But there should be a requirement to report certain hard numbers (cash revenues and cash held for instance) that should be audited and correct to the penny on a given day. If a business claims to have received 1m $/£/E in cash sales, they should be able to show their accountant credit transactions for that amount and 0.1% of those should be checked by calling the customer and confirming they paid the money. The same applies for cash on hand on a historic day.
Nothing will make fraud impossible, but right now it's just so easy...
Which is exactly the usual audit procedure - a sample of account balances and turnover is tested (i.e., confirmed) with the counterparty as part of testing.
They basically do this now (or are supposed to) but only once a year for the annual audit. It gets complicated when you have related party transactions, where separate private companies that are secretly controlled by the CEO can claim that they owe money to the main company. Eventually these things get found out, like in this case, but by then a lot of investors can lose their money.
Nothing will make fraud impossible, but right now it's just so easy...