This situation is very similar to what a company called Enron did several years ago. Use the internet or the university library to research exactly what Enron did in their accounting procedures and what eventually happened to the company.
The name of the company is called ENRON. The name of my book is Survey of Accounting, 3rd Edition, Chapter 7, and page 285, Author: Edmonds, Thomas; Olds, Philip; McNair, Frances; Tsay, Bor-Yi.