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But these bills were not received and paid for several months since these costs were incurred, while accounting principles required that the company made such payment estimations that were supposed to be matched by the revenues in the income statements. Therefore, the CFO told its subordinates to release accruals that were considered too high.
The CFOs of some of the units of WorldCom refused to book such entries. egardless of the CFOs repeated pressure, they refused to book these illegal entries. However, Sullivan managed to book his entries with the help of other managers that obtained the account number and determined subordinates to make the entry. In addition to this, some of the accounting department's employees made accrual releases without informing the senior managers.
This situation was established as a regular practice at WorldCom. The company's accountants also took part in this situation. This is because they accepted to release…
1. Kaplan, R. & Kiron, D. (2008). Accounting Fraud at WorldCom. Harvard Business School. Retrieved January 30, 2011.
Countrywide Accounting Fraud
In the year 1969, David Loeb moved to NY from Virginia to begin a home loan and advance organization named as "United Mortgage Servicing." He was joined by his trusted aide Angelo Mozilo. Both shared common dreams of big money and making their presence felt across the nation. The sole owner of the firm, David Loeb had to, under pressure of work, circumstances and colleagues part with half of the ownership. David Loeb and Angelo Mozilo became equal partners of the new firm that they formed, "Countrywide." They began their operations from and opened their new office in California. Angelo Mozilo was a very forceful and opportunistic marketer, and began pushing for contracts in the market aggressively. The organization was chipping away at two fundamental boards; David's NY-based credit exercises and Mozilo's home loan plot trades in the city of California. After they attempted to present open…
Chomsisengphet, S., & Pennington-Cross, A. (n.d.). Federal Reserve Bank of St. Louis Review, 88(1),(January/February 2006), 31 -- 56.
Freeman, W., Wells, P.A., & Wyatt, A. (2013). Insights from the Failure of the Countrywide Financial Corporation (SSRN Scholarly Paper No. ID 2275772). Rochester, NY: Social Science Research Network. Retrieved from http://papers.ssrn.com/abstract=2275772
Karlan, D.S., & Zinman, J. (2013). Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (SSRN Scholarly Paper No. ID 2272723). Rochester, NY: Social Science Research Network. Retrieved from http://papers.ssrn.com/abstract=2272723
Michael Hudson. (2011, September 23). Mortgage industry tanks, fraud continues at Countrywide. Retrieved December 19, 2014, from http://www.publicintegrity.org/2011/09/23/6706/mortgage-industry-tanks-fraud-continues-countrywide
Toshiba's response to the scandal was insufficient -- shareholders were protesting months later and many stakeholders did not really know what happened. Toshiba's response was simply to replace a lot of top leadership. The company should have been more forthcoming about the nature of the fraud, so that there was better understanding of the issue. Just as important, Toshiba needed to get in front of the response to the scandal -- the company needed to control the narrative with respect to how it was going to not only investigate but begin the process of repairing the corporate culture.
Accounting fraud cannot be linked strictly to Japanese factors. This was a persistent fraud that occurred over many years, but so was Enron. Accounting fraud of this type is more about organizational culture than national culture. There is no evidence to suggest that there was anything uniquely "Japanese" about this fraud --…
.....pressures that lead executives and managers to "cook the books?"
Although a company's profitability is ultimately only demonstrated in the long-term, short-term perceptions can affect the price of a company's stock which can in turn threaten its ability to thrive in the future. WorldCom was part of the highly competitive telecommunications industry and the desire to show that it was more profitable than its competitors as well as the fact that it needed to show that its recent mergers has been financially worthwhile (a difficult task that can take many years to do) fueled corruption at the company.
What is the boundary between earnings smoothings and or earnings management and fraudulent reporting?
Certain aspects of GAAP (generally accepted accounting principles) actually worked in favor of WorldCom's desire to make the company seem more profitable than it actually was; for example, line costs had to be estimated as profit given that…
DELL INC. FAUD
Business practices came under fire when America's seventh largest firm Enron collapsed due to unethical accounting strategies. This case triggered a series of unwelcome events where one after the other, large organizations in the U.S. collapsed or run for bankruptcy cover with one case even implicated the infamous Martha Stewart for insider trading. The various deceitful activities of some larger companies resulted in widespread public mistrust of business practices and values. Companies as big as Adelphia, ENON, Global Crossing, Kmart, Qwest communications, WorldCom and Xerox are all under thorough investigation by one of the few reliable authorities, Securities and Exchange Commission (oyal Bank of Scotland). All the aforementioned names were business of international repute that were charged with the unethical act of projecting inflated profits to trick stakeholders and earn higher profits and generate greater revenue from expensive stocks (oyal Bank of Scotland). WorldCom ran for insolvency…
Hess, E. Stark Lessons From The Dell Fraud Case. Forbes. Oct 2010
Goldman, D. Dell settles fraud charges for $100 million. CNNMoney 2010
SEC Administrative proceedings. 2010. Retrieved online from www.sec.gov/litigation/admin/2010/34-63600.pdf
There are basically two choices that Chris has. The first is that Chris can increase the allowance for bad debts to account for the possibility that Ender will not be able to pay its obligations. The second choice is that Chris can choose not to make any adjustments for this possibility. The receivable is material, so there are going to be meaningful consequences to the construction company if Ender is unable to pay this debt. Chris has an obligation to ensure that the financial statements for the construction company accurately reflect its financial condition. However, there is the mitigating factor that Chris does not actually have factual evidence of Ender's financial condition, just hearsay ("word on the street").
There are a number of different stakeholders here. The first is Chris; the second is Laurent. They are stakeholders on a person al level, having discussed this situation. The construction company…
FASB Topic 310. Retrieved September 29, 2015 from http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175821014426&blobheader=application/pdf
Mackey, J. (2005). Rethinking the social responsibility of business. Reason. Retrieved September 29, 2015 from https://reason.com/archives/2005/10/01/rethinking-the-social-responsi
McConnell, T. (2014) Moral dilemmas. Stanford Encyclopedia of Philosophy. Retrieved September 29, 2015 from http://plato.stanford.edu/entries/moral-dilemmas/
Law Is Likely to Affect All of the Following: Audit Committees of Public Company Boards of Directors
According to Sections 201 and 204 of the Sarbanes-Oxley Act (SOX), auditors must report "all critical accounting policies and practices" and the members of an audit committee cannot offer "non-audit services for public company audit clients" (PowerPoint, slide 6). According to SOX Section 303 and 404, company officers are prohibited from influencing auditors and "the auditor shall attest to, and report on, the assessment of internal control made by the management of the public company" (PowerPoint, slide 6).
A study of U.S. Securities and Exchange Commission (SEC) sanctions against auditors before and after the implementation of SOX up to 2010 found that common reasons for auditor failure to detect fraud include "failure to exercise due professional care;" "insufficient levels of professional skepticism;" "inadequate identification and assessment of risks;" and "failure to respond to…
Cohn, M. (2011). Congress probes accountants' role in financial crisis. Accounting Today.
Beasley, M. Carcello, J, & Neal, T. (2013). An analysis of alleged auditor deficiencies in SEC
fraud investigations: 1998-2010. Center for Audit Quality. Retrieved from:
Accounting and Audit Enforcement
1. The Sarbanes-Oxley Act applies to publicly-traded companies. Thus, it does not apply to non-profit entities. Nor does it apply to for-profit entities that are not publicly-traded. This is because SOX was passed specifically to address instances of accounting fraud in publicly traded companies that were undermining consumer trust in the capital markets (101.com, 2018). A publicly traded companies has a variety of different obligations under SOX that will help to reduce the opportunities and incentives for accounting fraud. Both opportunity and incentive are components of the fraud triangle – one needs to have a perceived need to commit the fraud and the circumstances with which to do so (ACFE, 2018).
Non-profit organizations have no obligations under SOX. However, there is a school of thought that holds that non-profit entities can benefit from some of the recommendations and mandates that SOX contains. Fritz (2016) writes that…
cross examine the accounting fraud scandal that took place at Xerox, the main intention of this analysis is to know the causes and the effects of the scandal as well as the need of a good practice in business ethics, corporate management and the general oversight. Xerox was able to utilize a creative technique of accounting to give false presentation of its assets and liabilities, they also deceive the investors and lastly they were able to inflate their socks. The main players of the scandal were the chairman, CEO and other high ranking officials who took the advantage and enriched themselves (Gara, D. 2004). The high ranked officials made away millions of shillings at the expense of the stakeholders. This scandal highlighted the need for accountability and ethics in the governance of finance as well as corporate.
The analysis also aims to examine the strategic mistakes that led the Xerox…
Coenen, T. (2008) Essentials of corporate fraud. John Wiley and Sons. Retrieved on May 25, 2014 www.slideshare.net/divinvarghese/xerox-corporation-fraud-case-982933
Pickett, K.H. Spencer. (2007)Corporate fraud a manager's journey. John Wiley and Sons. Retrieved on May 25, 2014 www.wsws.org/en/articles/2002/.../xero-j01.htm
Gara, D. (2004) Corporate fraud case studies in detection and prevention. John Wiley and Sons. Retrieved on May 25, 2014 www.money.cnn.com/2002/04/11/technology/xerox_fraud
Comer, M. (2003) Investigating corporate fraud. Gower Publishing, Ltd. Retrieved on May 25, 2014 www.i-sight.com/.../xeroxs-accounting-scandal-recovery-tactics
The other two cases looked at errors that were made deliberately by subsidiary management and, in both cases, were both quantitatively and qualitatively material.
Due to the fact that most fraud starts at the bottom, is it very important for executives to always be looking for things that do not appear to be right. Fiscal honesty is crucial in financial markets. It is essential that management quickly resolve any monetary issues that come up. Delay only compounds accounting indiscretions. The consequences to all concerned, the business, its investors and creditors, and administration, are that if things are left unattended they will only get worse.
There is no alternative to good systems of recordkeeping, controls, and oversight. Management cannot be distant and disinterested. Financial reports must be looked at and examined, not just amassed. Discrepancies must be rapidly resolved. Communication of accounting rules and measures must be apparent and timely. Doubts…
Weinstein, Edward a. (2010). When it Comes to Fraud, it's Better to Be Safe than Sorry. The CPA Journal, p.6-9.
What is financial fraud?
Effect on Economy
Are we Protected?
Identity Theft in Business
Loss Prevention Planning and Strategies
Financial fraud was an unfamiliar notion prior to the 2000's, but has become a controversial and familiar term due to economic woes, public disapproval and revamped financial regulations. Light was shed on some of America's top organizations intentionally changing their accounting books to look more attractive to investors than they were in actuality. Institutions and/or ranking officials at institutions were falsely publishing financial statements with fabricated values and profits presenting the illusion that investments with these entities were producing and would continue to produce consistent returns. In addition to recurring fraudulent activity, new highs for deposits of fraudulent checks were recorded by banks nationwide.
Government agencies aim to set regulations, enforce regulations, and protect American businesses and consumers from fraudulent activity. Laws are…
Elliott, T.L. (2013). Business ethics perspectives: Faculty plagiarism and fraud. Journal of Business Ethics, 112(2), 91-99.
Laufer, D. (2011). Small business entrepreneurs: A focus on fraud risk and prevention. American Journal of Economics and Business Administration, 3(2), 401-404.
Nikitkov, A. & . (2008). Online auction fraud: Ethical perspective. Journal of Business Ethics, 79(3), 235-244.
Yallapragada, R.R. (2013). Accounting fraud, and white-collar crimes in the United States. Journal of Business Case Studies, 8(2), 187.
Such adjusting entries will help to improve the accuracy of financial statements. Adjusting entries is necessary because accrual accounting systems demand that the events are recorded accurately. They are not to be recorded strictly on the basis of cash transactions, and all of these adjustments serve to translate the accounting figures that arise from the cash accounting to accrual accounting by incorporating all of the different non-cash transactions and ensuring that every element of the income statement and balance sheet is correct.
On a computerized accounting system, there might be software that can actually make these entries. If not they will need to be entered manually into the system.
As with any accounting, there are certain ethical issues that need to be understood. The accrual statements are where we report our profits and losses. It is important that they are completed accurately. Any fraud is illegal and cannot be tolerated.…
No author. (2012). Adjusting entries. Accounting Coach.com. Retrieved November 29, 2012 from http://www.accountingcoach.com/online-accounting-course/08Xpg01.html
This would immediately flag the loans going outside their own bank and also provide greater insights into how customers were using funds over time. Another approach is to incent auditors to find fraud and embezzlement and make it widely known in the bank that anyone finding illegal practices would receive a reward up to 20% of the error found. Auditors, who are traditionally not paid that much, would work overtime looking for fraud, hoping to earn 20% of the fraud found, thereby drastically reducing the threat. While this may appear expensive, without this strategy a bank could go for years, losing millions of dollars, if no action was taken.
In the case study, it is apparent that Greater Providence Deposit and Trust auditors were not organized or incented in their job design and rewards to actively seek out embezzlement and fraud. This is a major limitation in the design and…
Kristy Holtfreter, Kevin M. Beaver, Michael D. Reisig, & Travis C. Pratt. (2010). Low self-control and fraud offending. Journal of Financial Crime, 17(3), 295-307.
Eelco R. Van Wijk, & Timothy R. Holmes. (2007). Fraud in the Audit Department. The Internal Auditor, 64(2), 83-85,8.
Joseph T. Wells. (1998). An unholy trinity. The Internal Auditor, 55(2), 28-33.
Accounting and Intrusion Detection
In a report issued by Paladin Technologies, Inc., entitled: "Security Metrics: Providing Cost Justification for Security Projects," 273 organizations were surveyed on the topic of security. The report illustrates in quantifiable terms the depth and reach of intrusion detection on the financial viability of the organization. The combined reported losses from the firms surveyed totaled $265.6 million in 1999. The highest loss categories were reported as follows:
Type of Loss
Estimated Dollar Value
Number of espondents
Theft of intellectual capital
The average annual financial loss of firms surveyed was estimated at $40 million. Forty three percent of respondents were able to quantify financial losses, and seventy four percent were able to acknowledge financial loss. Ninety percent detected cyber attacks within the most recent twelve-month period and seventy percent reported serious breaches other than viruses, laptop theft, and employee abuse of…
Risk Assessment risk assessment involves estimating the likelihood and severity of an occurrence, the relative impact of risk on the facility, information handler, processing, support, and the mission of the organization. Assessing the likelihood means determining the probability that existing controls will be skirted. Pfleeger has identified a series of steps for examining the likelihood of adverse occurrences:
Calculate the probability that the risk may happen, found in the observed data for the specific system.
Estimate the likely number occurrences in a given time period. The analyst gives a rating based on several different risk analysis methodologies, and then creates a table to hold and compare the ratings.
The Delphi approach: several raters individually estimate the probable likelihood of an event, combine their estimates, and choose the best one.
The proper authorization to complete an inventory also needs to include training on how to manage the exceptions that often occur when physical counting is taking place (Corman, 1988).
The third principle to have adequate documents and records in place that can be quickly be used by the teams completing the audits. This also needs to be preceded with a training session focused on how to also manage exceptions to the paperwork as well, as each company's physical inventory processes are unique to their specific business models (andall, 1984).
The fourth and fifth principles are physical controls and independent checks on performance. These two principles need to anchor all training activity and also be continually audited to ensure performance to standards set over decades are attained. Physical controls and independent checks are also indispensable to the audit and final approval of physical inventory levels, which is the first step in…
Corman, T.R. (1988). Inventory management. Hospital Materiel Management Quarterly, 10(2), 5-5.
Giannoccaro, I., & Pontrandolfo, P. (2002). Inventory management in supply chains: A reinforcement learning approach. International Journal of Production Economics, 78(2), 153-161.
Howard, K. (1984). Inventory management in practice. International Journal of Physical Distribution & Logistics Management, 14(2), 3-3.
Randall, a.M. (1984). Computerized inventory management: A return to basics. Hospital Materiel Management Quarterly, 5(3), 12-12.
(5) Auditors and CPAs should consider several ways that the Sarbanes-Oxley Act and SEC implementation rules as a whole impact accountants and work closely with regulators to address these effects. (6) Public accounting firms need to reconsider external auditors' participation with their client's internal audit function and control structure. This reporting on the internal controls can be very useful and add value to the integrity and quality of the financial reporting process. However, management accepts full responsibility for the design and maintenance of the adequate and effective internal control system. (7) Auditors should advise their clients and make recommendations for the appropriate disclosures of financial information. A more timely, relevant, objective, and transparent financial reporting process should improve the quality, integrity, and reliability. (8) it is necessary to use more effective and objective audit procedures and related standards to improve audit efficiency. The role of independent auditors on financial statements…
Journal of Accountancy. 199(2) p. 74-75.
Rezaee, Z. (2004) Restoring public trust in the accounting profession by developing anti- fraud education, programs, and auditing Managerial Auditing Journal. 19(1): 134-148
Walker, D.M. (2005) Reclaiming public trust in the wake of recent corporate accountability failures International Journal of Disclosure and Governance 2(3):.. 264-271-279
In this case, it was a $4.9 billion bank account. However, credit would have been granted against an asset like that. Finding such an account did not exist, banks would have wanted their money back, and Parmalat would not have had it. This would be grounds to take the company into insolvency, especially if somebody at Parmalat was counting on that account to pay off its debts.
4. These fraudulent activities, as noted, would have boosted the accounts receivable at Parmalat, and could potentially have reduced the inventories as well. The effect on the balance sheet, if the inventories were not affected, would have been to boost the a/R and therefore the current assets. As a result, the quick ratio would have improved, on the basis of an inflated accounts receivable.
5. Citicorp was a victim here. There are some controls that can be done to ensure that the financial…
No author. (2004). File suggests double-billing by Parmalat. New York Times. Retrieved April 6, 2012 from http://www.nytimes.com/2004/02/02/world/files-suggest-double-billing-by-parmalat.html
The reality was that a company which aspired to be "the No. 1 stock on all Street" was instead steadily bleeding money while claim growth in the billions.
The pressure placed upon accountants at ordCom was reflective of the pressure facing accountants throughout the economy during this period of widely absence securities oversight. Indeed, the relationship between regulation and accounting is essential, and this diminished link would have catastrophic implications for the profession as a whole. Such is shown by the Scott text, which tells that "efficient securities market theory has major implications for financial accounting. One of these is that supplementary information in financial statement notes or elsewhere is just as useful as information in the financial statements proper. Another is that efficiency is defined relative to a stock of publicly known information. Financial reporting has a role to play in improving the amount, timing, and accuracy of this…
Kaplan, R.S. & Kiron, D. (2007). Accounting Fraud at WorldCom. Harvard Business School.
Scott, W.R. (2006). Financial Accounting Theory, 4th Ed. Pearson-Prentice Hall.
Skeel, D. (2005). Icarus in the Boardroom: The Fundamental Flaws in Corporate America and Where They Came From. Oxford University Press.
internal control weaknesses that existed at MCI that contributed to the commission of accounting fraud
The internal control weaknesses that existed at MCI that contributed to the commissioning of the accounting fraud was related to the very fact that Pavlov had the ability and access that allowed him to manipulate the account receivable system. Since he helped in the creation of the account receivable process, he was very ware of the system's strength and weaknesses as well as how to exploit them by manipulating the system (Lyon & Tocco,2007).He was therefore able to fraudulently receive payments, update as well as manipulate the account receivable records. This allowed him an opportunity of defrauding the firm and its clients by embezzling the funds to offshore accounts.
The exact fraudulent practices and tricks that Pavlo and his co-conspirators engaged in included the following:
The identification of the account receivables that were about to…
Carpenter, T., Durtschi.,C and Gaynor., LM (2002).The Role of Experience in Professional Skepticism, Knowledge Acquisition, and Fraud Detection
Fullerton, Rosemary and Durtschi, Cindy (2004).The Effect of Professional Skepticism on the Fraud Detection Skills of Internal Auditors (11 November 2004)., . Available at SSRN: http://ssrn.com/abstract=617062 or doi:10.2139/ssrn.617062
Kranacher, M.,Riley, R., Wells, JT., (2011).Forensic Accounting and Fraud Examination, 1st Edition.Association of Certified Fraud Examiners .
With software and technological oversight, many of the errors experienced by Insight Enterprises could have been avoided. Furthermore, the duration that these errors occurred suggests that proper oversight of accounting was not in the company. With technology, proper oversight can help reduce the duration, and the subsequent damage of accounting errors (Elliot, 2004).
Technology also allows accountants be more efficient in regard to their labor. Technology helps to reduce much or the redundant and routine tasks associated with accounting. Accountants no longer need to count specific line items or add all the ledgers together by hand. They simply input the required numbers into the system, which will do the computations itself, free from human error. The oversight system within technology can also help diminish the intentional errors of unethical accountants attempting to steal or input incorrect data into the system. As such, technology helps abate the influence of fraud within…
1) Bratton, William W. "Enron and the Dark Side of Shareholder Value" (Tulane Law Review, New Orleans, May 2002) p. 61
2) Elliot, Barry & Elliot, Jamie: Financial accounting and reporting, Prentice Hall, London 2004, ISBN 0-273-70364-1, p. 3
ite Aid Fraud
Over the years, there have been numerous cases of financial fraud perpetuated within the organizational mainstream of major companies. Financial fraud is often a well-coordinated sort of white-collar crime that often -- but not always - requires complicity and collusion amongst financial accountants, top management and auditors. ite Aid came to the limelight after the U.S. Securities and Exchange Commission announced that it would be filing accounting fraud charges against the company in 2002
Meanwhile, the United States Attorney for the Middle District of Pennsylvania leveled similar criminal charges accusing former CFO Frank Bergonzi, former CEO Martin Grass and former Vice Chairman Franklin Brown of perpetuating an immense accounting fraud scheme
. Compounding the crisis, according to former ite Aid COO, Timothy Noonan, were years of legal coaching amongst staff and mid-level employees. As investigations ensued, evidence of fraudulent manipulation of accounts, corporate malfeasance, and financial overstatement…
Carlin, Wayne M. & Pennington, Nelson "SEC Announces Fraud Charges Against Former Rite Aid Senior Management" Security and Exchange Commission 2002
Federwisch, Anne Exploring Ethical Lapses during the Rite Aid Crisis Santa Clara University: Center for Allied Ethics, 2002
Jennings, Marianne Seven Signs of Ethical Collapse: How to Spot Moral Meltdowns Before it's Too Late Arizona State University W.P. Carey School of Business, 2007
Carlin, Wayne M. & Pennington, Nelson "SEC Announces Fraud Charges Against Former Rite Aid Senior Management" Security and Exchange Commission 2002
Ethical Issues in AIS
Ethical Issues in Accounting Information Systems
This essay examines ethical issues in accounting information systems as presented in the case of DHB Industries. Now known as Point Blank Solutions, the company, which supplied body armor to the U.S. military and law enforcement agencies, was charged by the SEC on March 1, 2011 for engaging in "massive accounting fraud" (SEC, 2011). The agency filed separate charges against three of the company's former outside directors and audit committee members for their complicity in the fraud.
According to the SEC, DHB Industries engaged in "pervasive accounting and disclosure fraud through its senior officers" (2011), along with misappropriating company assets to the personal benefit of the company's former CEO. Their accounting and disclosure fraud resulted in the company's filing "materially false and misleading periodic reports to investors" (2011). The SEC charged that the company's senior management manipulated the company's reported…
Cohn, M. (2011, November 10). Body armor execs settle accounting fraud charges. Accounting Today for the Web CPA. Retrieved January 13, 2012 from: http://www.accountingtoday.com/news/Body-Armor-Execs-DHB-Point-Blank-Settle-Accounting-Fraud-Charges-60767-1.html
Gantt, K., Generas, G., & Lamberton, B. (2007, September). Sarbanes-Oxley, accounting scandals, and state accountancy boards. The CPA Journal online. Retrieved January 13, 2012 from: http://www.nysscpa.org/cpajournal/2007/907/essentials/p18.htm
Norris, F. (2011, March 3). For boards, S.E.C. keeps the bar low. New York Times website. Retrieved January 13, 2012 from: http://www.nytimes.com/2011/03/04/business/04norris.html?pagewanted=all
Securities and Exchange Commission. (2011, February 28). SEC charges military body armor supplier and former outside directors with accounting fraud. Retrieved January 13, 2012 from: http://sec.gov/news/press/2011/2011-52.htm
However, since Enormo refuses to consider the seriousness of Ultro's illegal actions, the accounting firm should immediately distance itself from the company, and refuse to perform the audit.
The accounting firm has two options: firstly, in the name of confidentiality, it could remain silent, and hope that no other firm would take Enormo's case, which would pressure Enormo to rectify the situation and reveal the actions of Ultro to the world. Unfortunately this seems unlikely, given Enormo's intransigence and the unscrupulousness of many accounting firms. If the firm does not reveal Ultro's actions, untold numbers of employees and investors might suffer after the scandal was revealed and Enormo's reputation resulted in financial devastation to the company and its subsidiaries.
Granted, there is a great temptation not to bring the case of Enormo to regulators, for fear of the accounting firm seeming like a 'tattle-tale' of its various clients' misdeeds. However,…
unbeam Corporation's fraudulent accounting for its financial years 1996, 1997 and early 1998. The essay also reviews the historic audit failure that occurred, and discusses factors that contributed to the scandal and ways in which it might have been prevented.
unbeam, the consumer brand name that was to become well-known among generations of Americans, had its beginnings in 1893 when founders John K. tewart and Thomas J. Clark began manufacturing and selling a commercial horse clipping machine in Chicago. In 1897 the company was incorporated as the Chicago Flexible haft Company. When the company began manufacturing an electric iron named "The Princess," its first electric appliance, the product's introduction marked the beginning of the Electrical Appliance Division of today's Jarden Corporation (Jarden, 2011).
In the early years, the company's products, ranging from toasters to irons to mixers, were so successful that the company changed its name to the unbeam Corporation…
Securities and Exchange Commission. (1999). SEC Staff Accounting Bulletin: No. 99 -- Materiality. [online] Available at: [Accessed 23 December 2011].
Stanwick, S. And Stanwick, P. (2003). Sunbeam Corporation: "Chainsaw Al" and the Quest for a Turnaround. Auburn University. [online] Available at: [Accessed 23 December 2011].
Zabel, R.B. And Benjamin, J.J. (2002). Reviewing Materiality in Accounting Fraud. New York Law Journal. [online] Available at: [Accessed 23 December 2011].
Accounting Fraud at CIT Computer Leasing Group, Inc." by Michelman et al. The security of the data in this organization as identified in this article is extremely suspect, primarily because it relates to the honesty and integrity of the individuals working for CIT Computer Leasing Group, Inc. From an Accounting Information Systems standpoint, the internal controls were relatively simple. Moreover, they actually appeared to be intrinsically linked to operations -- partially due to the fact that a large part of the business of the aforementioned company relates to returned leases to computer equipment. If the individual responsible for the accounting of these computers that are supposed to be returned to the organization does not report them accurately, he can override virtually all controls due to his inaccuracies which he can later on utilize to his own financial benefit. Thus, because this system involves company assets that are outside of the…
Michelman, Jeffrey, Gorman, Victoria, Trompeter, Gregory. "Accounting Fraud at CIT Computer Leasing Group, Inc." Issues in Accounting Education. Vol. 26, no.3, pp. 569-591. 2011. Print.
The question is missing a clause. "…is more conducive to ethical behavior" than what? The word "more" invites comparison but there is nothing to compare the current environment to. Well, the current environment is not much different than any past environment. The regulatory environment does not dictate ethics, as ethics exist distinct from laws. Ethical behavior rests on how society itself defines ethics, and is only loosely related to the regulatory environment. So while there is definitely a tighter regulatory environment at least with the introduction of Sarbanes-Oxley and the PCAOB, these laws do not dictate ethics, just behavior (Lennox & Pittman, 2010). Indeed, an increasingly complex regulatory environment only serves to complicate the issue of individual ethics, and creates confusion among business practitioners between legal/illegal and right/wrong, the two operating entirely different conceptual spheres (Jennings, 2004).
The "business" environment is quite vague -- there are many facets…
Erickson, J. (2011). Overlitigating corporate fraud: An empirical examination. Iowa Law Review. Vol 97 (2011) 49-100.
Gerety, M. & Lehn, K. (1997). The causes and consequences of accounting fraud. Managerial and Decision Economics. Vol. 18 (7-8) 587-599.
Jennings, M. (2004). The disconnect between and among legal ethics, business ethics, law and virtue: Learning not to make ethics so complex. St. Thomas Law Journal. Vol 1 (2) 995-1040.
Lennox, C. & Pittman, J. (2010). Big five audits and accounting fraud. Contemporary Accounting Research. Vol. 27 (1) 209-247.
Tesco’s Fraud in the Accounting Information System
The Accounting Information Systems (AIS) plays a central part in the business computing structure of any organization. AIS deals with the classification, collection, storage, monitoring, and conversion of the company’s data into information utilized for internal control and reporting (Smith, 2016). Once an organization adopts an Accounting Information System, they can keep accurate records, and manage the assets of the organizations properly. The management utilizes AIS to guarantee that there are suitable access and separation of duty controls. With such restrictions, the administration can hold the employees responsible for their interaction with the system. This paper delves into how the components and functions of Tesco’s accounting information system contributed to the 2014 fraud scandal.
Tesco’s Fraud Scandal
Tesco is popular grocery retailer with its head office in Welwyn Garden City, Hertfordshire, U.K. (Colson, 2017). Globally, it is ranked at position nine regarding revenues…
Corporate fraud as a dishonest activity for organizations that is considered as white collar crime has serious legal implications. Though it can be difficult to detect and catch, it is important to prevent it by creating effective and efficient policies for the organizations that ensure an efficient system of checks and balances exists in the organization for its physical and fiscal security. Whenever fraud happens in a company or organization, it often takes the form of hiding sources of revenue, overstating expenses or growth, or disguising payments made to individuals in the company. Often, fraudulent activities within the organization are complex in nature and have a gross impact on the financial nature of the organization. It is usually perpetrated by the company management and other employees are often unaware of these fraudulent activities (Mele, 2005).
Corporate fraud, as difficult as it is to prevent, often has a ripple effect whereby…
Bertrand, V. (2009). Organizational Isomorphism and Corruption: An Empirical Research in Russia. Journal of Business Ethics, 89(1), 59-76.
Federal Bureau of Investigation. (2014). Rooting out health care fraud is central to the well-being of both our citizens and the overall economy. Retrieved April, 2014, from http://www.fbi.gov/about-us/investigate/white_collar/health-care-fraud
Mele, D. (2005). Ethical Education in Accounting: Integrating Rules, Values and Virtues. Journal of Business Ethics, 57(1), 97-109.
Panda, J.K. (2006). Accounting & Finance For Management. New Delhi: Sarup Book Publishers Pvt. Limited.
The mistake occurred when enthusiasts tried to use those data for other purposes such as 'strategic product decisions.' The average cost of production never could, and never will, be relevant for those classes of decisions where only the change in total costs and revenues are relevant. That is, the rough, average post calculations provided a guide for pricing unique one-off products or services, but were of no use for the other purposes (emphasis added) (Garner & Tsuji, 1995, p. 52).
The strategic product decision function of management accounting described above is based on the strategic management accounting method; this approach serves to cause change in the management framework through various accounting devices designed to adapt effectively to the constantly changing external business environment (Garner & Tsuji, 1995). Strategic management accounting, though, should be managed by production people (including sales and engineering), rather than by accounting staff (Garner & Tsuji, 1995).…
Anthony, R.N. (2003, January 1). Management accounting: a personal history. Journal of Management Accounting Research, 15, 249.
Black, T., & Gallagher, L. (1999). Are physical capacity constraints relevant?: Applying finance-economics theory to a management accounting misconception. Australian Journal of Management, 24(2), 143.
Cooper R., & Kaplan, R.S. (1990, February). Measure costs right: Make the right decision. CPA Journal, 25.
Cortada, J.W. (2004). The digital hand: How computers changed the work of American manufacturing, transportation, and retail industries. New York: Oxford University Press.
Enron was one of the biggest business collapses, and one of the most egregious incidents during a period in the early 2000s when investor faith in the securities system was shaken by a series of scandals. The scandals varied in terms of their composition, but behind each of them was greed, the drive by senior management teams to defraud securities regulators and investors for their own gain. This paper will look at the Enron fraud in particular. This was probably the worst, for the bald-faced contempt that Enron management showed to securities regulators, and the biggest, as Enron was one of the stars of the stock market during its ride up, and crashed to worthlessness almost instantly.
As with most cases of stock market fraud, the key players were the senior executives. At Enron, the key players were Kenneth Lay, Jeffrey Skilling, Andrew Fastow and the accounting…
Accounting Profession: New Scrutiny and esponsibilities
While many people treat the accounting profession as something which lacks glamour and prestige, ordinary civilians often don't realize how crucial the accounting profession is to the world at large. The accounting departments in major firms are often what provides a foundation for most companies to be able to do what they do and accomplish tasks as needed. Accountants are the ones who are able to keep track of all the finances that are going out vs. what is coming in. Given the "new normal" in the world of corporate finance in light of the more recent corporate scandals, the work that accountants do have a greater level of importance. Accountants are now under greater scrutiny and have greater levels of responsibility: the accounting departments in major firms are now seen as ethical watch-dogs.
The skills and knowledge required in being an accountant are…
Balassone, J. (2014). Ethical Meltdown: Red Flags for Directors. Retrieved from scu.edu:
Einhorn, W.M. (2003). Ethical Accounting Practices and the Pressures on CPAs.
Retrieved from nysscpa.com:
It also publishes interpretations about certain rules.
WHEN AN ACCOUNTANT FAILS
The AICPA's Code of Professional Conduct is considered to be a binding agreement for every CPA in America.
As with other professions most accountants are ethical and honest in their dealings with their clients, however every so often a problem arises that must be disciplined. This can happen in a purposeful attempt to be deceitful, or it can happen by an error in judgment or an error in practice. egardless of how or why it happened a review is called for and a sanction or discipline course of action is decided upon (Badawi, 2002).
Most of the violations that occur are ethical dilemmas that are relatively easy to solve but some of the problems become quite in depth and resolution is more difficult to reach.
A study of conduct violations in a ten-year period produced the following result.
Badawi, Ibrahim M.(2002) Accounting codes of conduct, violations and disciplinary actions. Review of Business; 1/1/2002;
Carey, J.L. The CPA Plans for the Future. New York, NY: AICPA, 1965.
Demski, J.S. And J. L Zimmerman.(2000) "On Research vs. Teaching: A Long-Term Perspective." Accounting Horizons
Q1. How have accounting techniques changed in recent years? How do they resemble practices in Italy during the Renaissance?
According to McCrie (2016), one of the great innovations which emerged during the Renaissance was that of double-entry bookkeeping. This technique, still used today, records the organization’s assets in one column or book versus liabilities, or claims on those assets (p.252). The term “dual entry” came into practice given both records were listed in dual columns. Still, some substantial innovations have taken place since the early days of double-entry bookkeeping, most notably the advent of technology such as computers to compute assets and store data. The actual book of originally-recorded assets in real time now called a journal and the book which records the cumulative data is called a ledger. Debits and credits are the terms are now the preferred terms for assets and liabilities. But while terminology has changed and…
Particulars of Enron's Bankruptcy
There were a number of specific actions that led to Enron's bankruptcy. The majority of these pertain to a lack of accountability on the part of numerous people in key positions at this firm. The individual accountants at Arthur Andersen, the now defunct accounting firm that worked for this company, allowed Enron to utilize dubious accounting practices without trying to curtail them. Upper level management was guilty of allowing such accounting practices to take place, and of being too concerned with acquisition and spending to ensure the company was operating in accordance with the standards provided by the Securities Exchange Commission. Several fraudulent activities also contributed to Enron's bankruptcy. These include the insider trading that took place, the misrepresentation of the company as financially viable when it was on the verge of bankruptcy, and many others.
One of the primary accounting and auditing practices that eventually…
Cross, J.N., Krunkel, R.A. (n.d.). Andersen implosion over Enron: an analysis of the contagion effect on Fortune 500 firms. University of Wisconsin.
Emshwiller, J.R. (2001). Enron transaction with entity run by executive raises questions. The Wall Street Journal. Retrieved from http://faculty.msb.edu/bodurthj/teaching/ENRON/Enron%20Transaction%20With%20Entity%20Run%20by%20Executive%20Raises%20Questions.htm
Yost directly aware of the fact that counting different locations on the same day was not the best idea if accuracy was demanded. However, Yost shot down the idea of doing all locations on the same day and even went to so far as to sign off on the fact that doing all locations on the same day was not practical due to manpower/locational issues.
B) To defend themselves against the bank, the PA firm could simply point to the details enumerated in the prior part of this question. Yost specifically and explicitly brought up the fact that doing counts on different days was less than wise. This was surely because even if no subterfuge was going on (and it was), it would give the appearance of impropriety, or at least bad procedure.
) Yes, they would probably prevail. Yost specifically noticed and advised their client that they were unwise…
Chapter 8 - Question 30
There are a few red flag and issues that should be discussed about the two sets of meeting minutes. First, the talk about the IRS audit was a little incomplete and there was not a lot of good news to glean from it. Related to this is the handling of the computer equipment and this neatly dovetails with the timeline of the computer switchovers. They dispensed with the equipment shuttered after the 2008 computers were purchased and then the very next day the spent money for yet another computer system in the form of a loan. The fact that the IRS audit period relates to property and it's the same year as the last computer upgrade is a head-scratcher.
Also concerning is that that every single vote was unanimous. The only thing that seemed to get anyone's dander up was the talk about the profit sharing for other employees. In terms of knowing for sure whether the meeting minutes were all forwarded, this would require either the auditor to be present in the room for all meetings or that the people involved sign off on the minutes being accurate and complete. If the auditor is presented with the fact that they are complete and they turn out not to be, the people who signed committed a fraud, in all likelihood. Again, though, it would be better if it was required that the auditor take the minutes themselves or author their own copy so as to compare to what is published and approved. If anything is omitted, changed or materially represented, then the auditor would have a cause of action to voice some concern.
Fraud is a growing problem in today's business world, and this article chronicles the capture of a purchasing manager defrauding his organization. The author follows step-by-step the accountant called in to decipher just how the manager was defrauding the organization. Immediately, CPA Chris osetti discovered two flaws in the state agency's internal controls. The manager was not forced to take a vacation every year, and the manager also had approval powers overstepping his position. Author Wells notes, "Once employees start committing fraud, they can't take time off because they need to constantly cover up what they're doing. The second deficiency was that Bruce [the manager] was allowed to approve new vendors" (Wells). osetti methodically goes about deciphering Bruce's activities while discovering more and more discrepancies between purchases, costs, and vendor files. As osetti dug deeper during Bruce's unplanned absence to take care of his ill wife, he discovered a number…
Wells, Joseph T. "The Case of the Pilfering Purchasing Manager." Journal of Accountancy - Online Issue - May 2004. 29 April 2004. http://www.aicpa.org/pubs/jofa/may2004/wells.htm
Assessing the Current and Future State of The lifeblood of any business is the revenue it generates while managing costs, ensuring profitability of the business, and its long-term survival and growth. The catalyst of managing a business effectively is the use of accounting information, financial analysis, and increasingly in the 21st century, the use of real-time financial analytics on key performance indicators (KPIs) used to manage a business (Ferguson, Seow, 2011). Accounting systems continue to be the foundation of managing businesses to profitability while mitigating potential risks though insightful and real-time use of financial data. The future of accounting systems will be increasingly influenced by the real-time reporting and analysis as the Securities and Exchange Commission (SEC) has required the largest publically traded corporations in the U.S. To report their results through the extensible Business eporting Language (XBL) protocol (Tribunella, Tribunella, 2010). The SEC is setting a very…
Ferguson, C., & Seow, P. (2011). Accounting information systems research over the past decade: Past and future trends. Accounting and Finance, 51(1), 235.
Gill, R.. (2011). Why Cloud Computing Matters to Finance. Strategic Finance, 92(7), 43-47,1.
Salah A Hammad, Ruzita Jusoh, & Elaine Yen Nee Oon. (2010). Management accounting system for hospitals: a research framework. Industrial Management + Data Systems, 110(5), 762-784.
Tribunella, T., & Tribunella, H.. (2010). Using XBRL to Analyze Financial Statements. The CPA Journal, 80(3), 69-72.
Accounting System Implemented at Chic Paints Limited
eport submitted in order to fulfil the requirements of AAT Accounting Qualification
Internal Controls and Fraud
Accounting System eview
Weaknesses in the Existing System and ecommendations
Cost and Benefit Analysis
Mapping of report to outcomes and criteria
The purpose of this report is to present the findings of the evaluation of existing accounting system implemented at Chic Paints Limited. Chic Paints Limited hired me as an Accounting Technician of the Company to review the accounting systems of the company and report on the operating effectiveness of the internal controls, and this report explains it.
The report also discusses the results of the evaluation of existing accounting systems implemented at Chic Paints Limited on the basis of the AAT code of Ethics and Sustainability requirements. The report also identifies and presents the weaknesses in the existing accounting system along with the effects of the…
Aat.org.uk (2013). AAT and sustainability | AAT. [Retrieved from: http://www.aat.org.uk/about-aat/aat-sustainability [Accessed: 16 Dec 2013].
AAT London (2011). AAT code of Professional Ethics. Code of Ethics. London: AAT.
Fraudiscovery.com (2013). 20 Question to Detect Fraud. Retrieved from: http://www.fraudiscovery.com/detect.html [Accessed: 16 Dec 2013].
Griffin, D. (2013). What Are Internal Accounting Controls? Retrieved from: http://smallbusiness.chron.com/internal-accounting-controls-3809.html [Accessed: 15 Dec 2013].
Medicare and Medicaid Services (CMS), previously the Health Care Financing Administration (HCFA), that by the time 2011, health care expenditure will arrive at $2.8 trillion, as well as it will bill for 17% of the Gross Domestic Product. As a result, it is no revelation that white-collar offenders observe health care deception as a rewarding effort. Certainly, the General Accounting Office ("GAO") quotes that such deception accounts for up to 10% of entire health care expense (3).
As health care deception outlays taxpayers almost $100 billion a year, federal, as well as state agencies have given health care fraud tribunal a key center of attention. All through her term, Attorney General Janet Reno made impeaching health care fraud a top precedence at the Department of Justice ("DOJ"), subsequent only to brutal offenses (3).
The government focuses its pains to perceive, as well as take legal action against health care fraud…
(1) Adelaide Few & Jay Trezevant, Fighting the Battle Against Health Care Fraud & Federal Enforcement Actions, 72 FLA. B.J. 34, 34-6 (1998)
(2) Alice A. Love, Leniency Offered Health Care Providers that Admit Federal Fraud, S.D. Union Trib., Oct. 22, 1998
(3) Andy Bunds, The results of the Health Insurance Regulations on Health Care Fraud and Abuse, 72 Mont L. Rev. 63, 72 (2001)
(4) Brian A. Kaset, Sailing Without Safe Harbors: Physician Recruitment and the Law of Fraud and Abuse, 9 Healths Span. 9, 9 (1992)
Advice for the Company on the New Internal Control Requirements
Internal control requirements are the policies, mechanisms and procedures that organizations should satisfy to minimize the operational risks. The internal control is very critical to deter employees from implementing fraudulent operations; an organization is required to adhere to the internal system before going public. Section 404 of the SOX (Sarbanes-Oxley) Act states that internal control is critical for a publicly operating company and internal control system is an auditing and accounting procedure that organizations should employ to achieve an efficient, effective and reliable financial reporting.
Overview of the LJB Company operations reveals that the company does not meet the requirements of the Section 404 of the SOX Act. Part of the Section 404 of the internal control system is that the function of the internal auditor should be separated from the work of an external auditor. In other word, an…
Kimmel, Paul D. Weygandt, Jerry J. Kieso, Donald E. Financial Accounting, 6th Edition. Wiley. 2011.
Accounting and Finance Soving Probems Soutions
P4-5: Microsoft Statements of Cash Fow 1999-2001
The Microsoft Corporation uses the indirect method to prepare the statement of the cash fow. The cash fow by operating activities is prepared by reconciing from the net income to the net cash. As being reveaed in the Microsoft statement of cash fow, the net income, depreciation, amortization, account receivabes and others are used to arrive at the net cash. In the cash fow statements, the depreciation and amortization are added to the net income based on its accrua basis.
The Microsoft added the unearned revenue to the net income because the company has aready received money for the product and services not yet fufied. As a resut, the company has the ega obigation to suppy these good and services to the purchaser. In other words, the unearned revenue is an equivaent of the net revenue that…
l. The gross profits represent the overall revenue derived from the total sales minus the cost of sales. Amazon made more sales in 1999 than 1998 because the net sale was $1,639,839,000 in 1999 compared to 1998 net sales, which was $609,819,000. The gross profits in 1999 was $290,645,000 compared to 1998 gross profit, which was $133,664,000.
m. Examples, of accrued expenses and other current liabilities include wages payable, monies that the company owe suppliers and interests payable for bank loans.
n. Total purchase of Amazon's inventory for 1999 are $220,646,000.
Assets in the investment portfolio were overvalued. Financial transactions were structured to report smaller amounts of debt and create the appearance of greater cash flow. Financial results were represented in a false and misleading manner.
Forensic accountants also played an important role in the Enron case by doing audits and investigating accounting practices to gather evidence of how the fraud was performed. They played vital roles in the court room in presenting the evidence against cross examination and scrutiny. The forensic accountants were highly valued for their objectivity in the way evidence was presented.
Accounting, auditing, investigation, business, and understanding human behavior enabled forensic accountants to gather evidence for prosecution of fraud in court cases involving fraudulent accounting practices. These are vital skills forensic accountants are required to maintain. Forensic accountants must maintain competency, due care, objectivity, integrity, confidentiality, and proper conduct at all times, whether working with a client…
Code of Professional Ethics. (2012). Retrieved from Institute of Certified Forensic Accountants: http://www.forensicglobal.org/ethics.html
Homan, P. (2006, Mar - Apr). Fraud Buster. Retrieved from CPA Magazine: http://www.utoronto.ca.difa/PDF/Articles/FraudBuster.pdf
Jury Finds Former Master Graphics, Inc. CEO Liable for Securityies Fraud Arising From Accounting Scheme. (2008, Sep 8). Retrieved from SEC: http://www.sec.gov/litigation/litreleases/2008/li20705.htm
Shields, a. (2010, Mar 29). The role of forensic accountants. Retrieved from dolmanbatemen.com: http://www.dolmanbateman.com.au/1323/the-role-of-forensic-accountants
Arthur Anderson: Questionable Accounting Parctices
Arthur Anderson: Questionable Accounting Practices
Arthur Andersen LLP was founded in 1913, and for over 90 years, the company would have become one of the "Big Five" largest accounting and auditing firms in the United States with the same standard comparable to PricewaterhouseCoopers, Deloitte & Touche, KPMG and Ernst & Young. In the 80s, Arthur Anderson name was synonymous with integrity, trust, and ethics. Such values are critical to the success of firms charged with auditing and firms confirming a company's financial statement, whose accuracy of a company's financial statements generally influence investor's investment decision. (Ferrell, Linda, 2012).
In the 1990s, Arthur Anderson became one of the fastest growing accounting and auditing firms in the United States with huge financial success during the period. However, starting from 2001, the company faced several lawsuits for accounting irregularities. In May 2001, "the company paid $110 million to…
Ferrell, O.C. Linda, J.F. (2012). Business Ethics: Ethical Decision Making and Cases: 2009 Update. Cengage Learning
Fraedrich, J. Ferrell, O.C. Ferrell, L.(2011). Ethical Decision Making for Business. Cengage Learning.
McGlynn, M (2010). Arthur Andersen Case Studies in Business Ethics. Carnegie Mellon Temper School of Business.
This role is in response to clients' demands for a single trustworthy individual or firm to meet all of their financial needs. However, accountants are restricted from providing these services to clients whose financial statements they also prepare." (U.S. Department of Labor, ureau of Labor Statistics, 2009)
1. Public Accounting
The work entitled: "The Reality of the CPA's Role" states that modern CPAs work "behind the scenes as trusted advisors in nearly all significant business decisions. Successful accountants display the ability to think strategically and creatively and to be problem solvers and business advisors." (Douglass, 2006) Douglass states that the views of the CPA are widely varied "...whether from the viewpoint of the investing public or from the perspective of the companies that engage CPAs to audit their financial statements or perform other functions. In fact, many people not involved in the business management or accounting profession may perceive CPAs…
Douglass, Kevin (2006) the Reality of the CPA's Role New Jersey CPA Magazine, April 2006. Accounting and Auditing. Online available at: http://www.amper.com/publications/amper-cpa-role.asp
Erard, Brian (1992) Taxation with Representation: An Analysis of the Role of Tax Practitioners in Tax Compliance. Journal of Public Economics 52 (1993) 163-107. North-Holland. Online available at: http://aysps.gsu.edu/isp/files/ISP_SUMMER_SCHOOL_2008_ERARD_TAXATION_WITHOUT_REPRESENTATION.pdf
Financial accounting for Local and State School Systems (2005) Chapter 4: Governmental Accounting. National Center for Education Statistics. U.S. Department of Education, Institute of Education Sciences. Online available at: http://nces.ed.gov/pubs2004/h2r2/ch_4.asp
Garrison, Ray H. And Noreen, Eric W. (2009) What is Managerial Accounting/Cost Accounting. Accounting Management. Online available t: http://www.accountingformanagement.com/
EU's Current Anti-Fraud Strategy
For some time now, the issue of fraud and corruption in public service has been an issue of concern. This has forced many organizations to establish strategies aimed at detecting and minimizing the occurrence of such fraudulent activities in areas under their jurisdiction. This paper discusses the strategic management concepts in the risk-based policing strategy coupled with the principles and importance involved in the enhancement of organisational performance. Complementary factors and organisational culture are components that facilitate and militate against strategic fraud and corruption. The paper established alternative and successful strategies dependent on the factors of willingness of groups and individuals and ways of accepting them. In turn, this is dependent on the people seeking change and an understanding of the organisation's culture. The following study identifies the strengths and weaknesses of the European Anti-fraud Office (OLAF) as a strategy used by the European Union in…
Barr, D., (2010). Fraud and error: The Future. Department for Work and Pensions
Brooks, G., Aleem, A., & Button, M., (2013). Fraud, Corruption and Sport. New York: Palgrave Macmillan.
Button, M., & Gee, J. (2013). Countering Fraud for Competitive Advantage: The Professional Approach to Reducing the Last Great Hidden Cost. New York: John Wiley & Sons.
Collier, P. (2005). Management Accounting-Risk and Control Strategy. New York: Elsevier.
studied appeared a business accounting publications. A partial list publications article selected: The Accounting eview, Barrons, Wall Street Journal, Business Week, Fortune, Barrons, and Wall Street Journal.
GAAP article review:
Crovitz, Gordon L. (2008, September 8).Closing the information GAAP. The Wall Street
Journal. etrieved November 22, 2010 at http://online.wsj.com/article/SB122083366235408621.html
GAAP article review:
Crovitz, Gordon L. (2008, September 8).Closing the information GAAP. The Wall Street
Journal. etrieved November 22, 2010 at http://online.wsj.com/article/SB122083366235408621.html
The Wall Street Journal is famous for its pro-business, conservative editorials. So perhaps it is no surprise that in 2008, Journal editorial writer Gordon L. Crovitz praised the Securities and Exchange Commission (SEC)'s decision to mandate a shift to international accounting standards, in a phasing out of GAAP (Generally Accepted Accounting Principles) by 2016 for all U.S. firms. The Journal writer said that this was reflective of the "remarkably quickening pace of acceptance of a true lingua franca for…
Crovitz, Gordon L. (2008, September 8).Closing the information GAAP. The Wall Street
Journal. Retrieved November 22, 2010 at http://online.wsj.com/article/SB122083366235408621.html
Gibson, Scott. (2008, October). LIFO vs. FIFO: A return to the basics. RMA Journal. Retrieved November 22, 2010 at http://findarticles.com/p/articles/mi_m0ITW/is_2_85/ai_n14897182/
The Accounting and Auditing Enforcement Release (AER) for this proceeding is no. 3288 June, 2011. In this case there was a violation of Section 10A of the exchange Act by L&H, Howley and ood 2005 & 2006-year-end audit, in addition this proceeding also discussed the year-end audits and quarterly interim reviews of the financial statements of Locate Plus Holdings Corporation ("Locate Plus") (Collectively "the Engagements"). Howley served as the Engagement Partner and ood served as the Concurring Partner on the Engagements. The complaint alleges that, as part of Locate Plus' fraud, its CEO and CFO created a fictitious customer called Omni Data Services, Inc. ("Omni Data") and that Locate Plus then improperly recognized revenue from Omni Data. The improper Omni Data revenue was included in Locate Plus' financial statements that were part of quarterly and annual reports for fiscal years 2005 and 2006 and were included in filings with…
Securities Exchange Act of 1913, USA before the SEC § et seq. (2011). Print.
Information System holds in Accounting Industry's future?
Looking through the glass and estimating what the future holds for any individual or profession is always a difficult exercise as the trends in any business or profession may change and so the path of development. It is better to look at the experience of some companies whose systems have changed over the past few years and thus try to estimate what is likely to happen.
There are many changes that have come to the world through the development of Information Technology and Computers. All the changes have come over a relatively short period of twenty years, and in many cases both industry and concerned humans are yet to adjust to the changes. There are many changes which have come in the accounting industry also, and those changes give an idea of what is likely to happen in the future.
The organization where…
Anders, Susan B. (February, 2005) "Website of the Month: Legalbitstream" The CPA Journal.
Retrieved from http://www.nysscpa.org/cpajournal/2005/205/essentials/p70.htm Accessed on 12 July, 2005
Anders, Susan B. (July, 2005) "Website of the Month: Kaplan CPA Review" The CPA Journal.
Retrieved from http://www.nysscpa.org/cpajournal/2005/705/essentials/p70.htm Accessed on 12 July, 2005
Future of Accounting
The business world is in a period of change, with accounting a major part of that business world. As one report says, "Accounting is the language of business. It is and always will be the analysis of how money is used by businesses, nonprofit organizations, governments and individuals" (Insight). As the business world changes, accounting must change to continue to meets the needs of businesses. This is one of the areas that will greatly influence the future of management accounting. To understand this issue further, the current and future trends in accounting will be investigated. This includes considering the changes in the work environment for accounting employees, trends in accounting roles and future opportunities for accountants, and future skills of accountants that will be in high demand. Considering these three areas will show where business accounting is headed and how best accounting professionals can prepare for these…
Gabbin, A.L. "The crisis in accounting education; the CPA's role in attracting the best and the brightest to the profession." Journal of Accountancy. April 2002. 7 Nov. 2002. http://www.aicpa.org/pubs/jofa/apr2002/gabbin.htm
Maness, D. "Visionaries: the future of accounting and finance software." BusinessFinanceMag. 2002. 7 Nov. 2002. http://www.bfmag.com/specialreports/Visionaries/
Ravine, S. "Accounting." The Ohio State University, Fisher College of Business. 7 Nov. 2002. http://fisher.osu.edu/fin/jobs/account.htm
The pace of change." Insight. February/March 2002. 7 Nov. 2002. http://www.insight-mag.com/insight/02/02/feat-3-pt-1-ThePaceOfChange.asp
Managerial Accounting: Organizations and Expectations
The profession and practice of accounting has become increasingly prominent and increasingly scrutinized over the past decade or so, in the wake of major scandals and upsets in the business world that can be traced in part to nebulous and unethical accounting practices or outright frauds. Because of this increased prominence, accountants today need to be more concerned than ever with not only the standards to which they hold themselves and their work, but also the appearance of these high standards and performance capabilities. This is one of the major benefits, along with many others, of belonging to a professional organization. The authority and austerity that the right professional organization carries provides these abstract as well as concrete benefits to member accountants, from increasing confidence and camaraderie to detailing the actual expectations and requirements of the task of accounting.
The Institute of Management Accountants is…
IMA. (2012). Institute of Management Accountants. Accessed 10 January 2011.
disclosure principle in accounting is the standard adopted by the accounting profession, which "calls for financial reporting of any financial facts significant enough to influence the judgment of an informed reader" (Kieso, Weygandt, & Warfield, 2007). Obviously, this definition is a very subjective one, because the reporting entity makes the determination of what facts are significant enough to influence an informed reader. "To reduce the amount of disclosure, it is customary to only disclose information about events that are likely to have a material impact on the entity's financial position or financial results" (Accounting Tools, 2011). However, the principle is not meant to be narrowly interpreted, and may require a company to report things that cannot be reduced to numbers on a balance sheet. For example, "this disclosure may include items that cannot yet be precisely quantified, such as the presence of a dispute with a government entity over a…
Accounting Principles. (2011). The full disclosure principle. Retrieved from http://www.accountingtools.com/full-disclosure-principle
Kieso, D.E., Weygandt, J.J., & Warfield, T.D. (2007). Intermediate accounting (12th ed.).
Hoboken, NJ: John Wiley & Sons.
conception that is laid behind write-down of inventory is that the amount value of the inventory being considered can still appear in the financial statements only if the inventory still has some worth or value. This particular amount value is attained by getting the difference between the original costs of the inventory as the prevailing market replacement value. In accordance to IAS 2, if the loss on write-down of inventory is minimal or trivial, it can be reported on the financial statements as a part of the cost of goods sold. On the other hand, if the loss amount is high then it is imperative to report it in the income statement in a separate line. More so, these kinds of aspects typically develop into a violation. Examples of these instances include the case of Enron Company and also the case of WorldCom. On the other hand, IAS1 encompasses the…
Rittenberg, Larry., Johnstone, Karla., Gramling, Audrey. Auditing: A Business Risk Approach. Ohio: South Western Cengage, 2010.
GAO. Financial Statement Restatements: Trends, Market Impacts, Regulatory Responses, and Remaining Challenges. Retrieved from: http://www.gao.gov/new.items/d03138.pdf
Jarry, Kimberly. The Progression of Financial Restatements: Causes and Market Reaction. University of New Hampshire, 2013. Retrieved from: http://scholars.unh.edu/cgi/viewcontent.cgi?article=1132&context=honors
Bickley, James. Employee Stock Options: Tax Treatment and Tax Issues. Congressional Research Service, 2012. Retrieved from: http://fas.org/sgp/crs/misc/RL31458.pdf
Criminal fraud vs. Civil fraud and taxation of U.S. businesses operating abroad
Tax and Tax Code reforms
When a client's accounts were appraised by the IS, it was discovered that an omission of $100,000 had occurred. Upon such discovery, the first step is to investigate the taxpayer individually so as to collect historic reports of the individual; whether he had engaged in any non-compliance of this sort earlier or this is his first time. To determine whether a criminal prosecution is appropriate, a proof that the misconduct was carried out without an acceptable reason is required (CIMINAL INVESTIGATIONS AND POSECUTIONS OF TAX FAUD CASES GUIDELINES). The following conditions must be kept in view when deciding whether a case can be prosecuted or not:
The validity of the proof of the fraud, the sources and contents used to produce a judgment.
The willingness of the prosecutor to carry on…
(n.d.). Department of Taxation and Finance. CRIMINAL INVESTIGATIONS AND PROSECUTIONS OF TAX FRAUD CASES GUIDELINES. Retrieved June 6, 2016, from http://www.tax.ny.gov/pdf/enforcement/cid_guidelines.pdf
Dubay. (2014). Conservative Policy Research and Analysis. How Tax Reform Would Help American Families. Retrieved June 6, 2016, from http://www.heritage.org/research/reports/2014/10/how-tax-reform-would-help-american-families
Gale. (2002). Brookings - Quality. Independence. Impact. The Tax Treatment of Foreign Income: Issues and Options. Retrieved June 6, 2016, from http://www.brookings.edu/~/media/research/files/testimony/2002/5/09corporatetaxes-gale/20020509.pdf
(n.d.). The White House -- whitehouse.gov. Taxes -- whitehouse.gov. Retrieved June 6, 2016, from http://www.whitehouse.gov/issues/taxes
The Financial Year/Accounting Period Concept
Application of Literature eview into practice for IKEA's 3-year (2009-2010-2011) financial reports
What is missing and ok in the reports? The good and bad points of eports based on Literature eview.
103-year comparative ratio analysis and their interpretations
Literature eview of "Strategic Management Accounting Concept" and its application to facilitate the IKEA's ambitions for the future.
The concept of financial reporting is important to each and every organization. The information contained in financial reports is important since it helps in the reduction of financial risks while also acting as a tool for corporate governance (Kothari,2000; Berndt,2007).Financial report must have a series of desirable characteristics. In this paper, we use IKEA's financial reports in evaluating the desirable characteristics of financial reports. Also discussed is the possible effects of using the concepts of strategic management accounting and its methods in the promotion and facilitation…
Beuselinck, C. & Manigart, S. (2007). Financial Reporting Quality in Private Equity Backed Companies: The Impact of Ownership Concentration. Small Business Economics, 29, 261-274.
Dabor, EL., Adeyemi, SB (2009).Corporate Governance and the credibility of financial statements in Nigeria. Journal of Business Systems, Governance and Ethics. Vol 4, (1)
Datamonitor (2012). Ikea Group. http://www.datamonitor.com/store/Product/ikea_group?productid=6878C795-4BCB-4C85-A319-6F33C508FD80
Dechow, P.M., Sloan, R.G. & Sweeney, A.P. (1996). Causes and consequences of earnings manipulation: An analysis of firms subject to enforcement actions by the SEC. Contemporary Accounting Research, 13(1), 1-36.
internal auditor, the external auditor and the CFO. The essay also reviews their respective responsibilities, inherent conflicts between them and ethical considerations for each. Finally the essay reviews the treatment of balance sheet items from the perspective of each position.
The internal auditor typically reports to the CFO and is responsible for reviewing work done by fellow employees, checking for errors, oversights and irregularities. The standard method used to conduct an audit involves examining a transaction or process and comparing how it was done with the way it is documented in an operating procedure or accounting convention, then reporting to management on any differences. The internal auditor may use a number of methods or tools to capture information, sometimes even designing or adapting an existing tool to track the information being reviewed (Blackburn, 2011).
Information presented in the internal auditor's report is vital to management's ability to run a successful…
Blackburn, V. (2011). What does an internal auditor do? Conjecture Corporation. Retrieved July 5, 2011 from http://www.wisegeek.com/what-does-an-internal-auditor-do.htm
Damewood, C.L. (2011). What does an external auditor do? Conjecture Corporation. Retrieved July 5, 2011 from http://www.wisegeek.com/what-does-an-external-auditor-do.htm
Institute of Internal Auditors. 2010. How do internal and external auditors differ and how should they relate? Retrieved July 5, 2011 from http://www.theiia.org/theiia/about-the-profession/internal-audit-faqs/?i=1086
Investopedia. (2011). What does a Chief Financial Officer (CFO) do? Retrieved July 5, 2011 from http://www.investopedia.com/ask/answers/04/042204.asp
Steinbach & Sons Accounting
Steinbach & Sons Case
The adjusting process that this case alludes to occurs both on the income statements as well as the balance sheet. The adjustment that will affect the income statement is:
$2,000 dollar sales of furniture to family members
Added to the gross revenues ( + $2,000)
The adjustments that will affect the balance sheet are:
$900 Wages owed to employees
This would be added to the short-term liabilities account ( + $900)
$400 Prepaid Insurance that Expired
This would be debited for the asset account ( - $400)
The additional revenue can be added to the profit and loss statement and be added to the gross revenue figure. The nine hundred dollars owed to employees will increase the liabilities account if properly adjusted. The prepaid insurance would count as an asset if not adjusted, however since it has expired if it…
Financial Fraud Fannie Mae
eview of Fraud Schemes within Fannie Mae 1998-2004
The agency found the fraud understatements of earnings and illegal gratuities that led to accounting violations and inability to meet Wall Street goals.
The investigation of Lee Frakas, executive of a major mortgage company which had dealings with Fannie Mae with hundreds of fake mortgages. The Securities Exchange Commission cited that Fannie Mae had to repay earnings and correct their books for the period 2001 through 2004. This major undertaking will cost the company over $11 billion by SEC estimates. In addition the Department of Justice has conducted a criminal investigation on the board members.
The top executive managing Fannie Mae were found guilty of illegally reporting accounting information that led to their receiving million dollar payments. Under Fraudulent Financial Statement Schemes this case is one of corruption and financial fraud. The specific areas include Illegal…
Associated Press. (2006). Fannie Mae manipulated accounting. Retrieved January 19, 2012 from http://www.msnbc.msn.com/id/12923225/ns/business-corporate_scandals/t/report-fannie-mae-manipulated-accounting/#
Schoenberg, T. (2011). Silence on taylor bean opened the way to $3 billion fraud. Retrieved January 19, 2012 from http://www.freerepublic.com/focus/f-news/926704/posts
Evaluate the factors that add to corporate fraud
The business fraud can be credited to conditions emerging from deceptive monetary reporting and misappropriation of possessions. These conditions are 3 and all 3 features of the fraud triangle have to exist for fraud to take place. Management or staff members have to have the reward or pressure to dedicate fraud, see the opportunity emerge and have the ability to justify the occasion.
Management or perhaps others in the workforce will have benefits or conditions of pressure to carry out fraud. If the choice is made by management to publish illegal monetary statements, the most typical reason for this will be threat by financial, market or entity operating conditions to the monetary security and productivity of the business. Extreme pressure is put on management to satisfy the projection made by industry experts, internal company projections or to pay back…
ISACA, 2011. COBIT Framework for IT Governance and Control. Retrieved from http://www.isaca.org/Knowledge-Center/COBIT/Pages/Overview.aspx
Louwers, T., Ramsay, R., Sinason, D., & Strawser, J. (2007). Auditing & Assurance Services: A Look Beneath the Surface. (2nd ed.). New York, New York: McGraw-Hill/Irwin.
Temple University. "Auditing ACCT 3596." Fox School of Business. 13th Ed. United States of America: Pearson, 2009. Print.
Wells, Joseph T. Corporate Fraud Handbook: Prevention and Detection. Hoboken, NJ: John Wiley & Sons, 2007. Print.
Olympus Corporation Fraud Case:
Olympus Corporation is one of Japan's most vulnerable companies that faced potential bankruptcy and possible jail time for its executives in 2011. The firm was founded in 1919 and it's a manufacturer of electronic equipments and digital cameras. In addition to being headquartered in Tokyo, Olympus Corporation is a multibillion-dollar company with its operations across the globe. In October 2011, the corporation was hit by a scandal when its Chief Executive Officer was suddenly fired, a decision that was attributed to a culture clash. While the chief executive had worked in the firm for three decades, he was sacked for attempting to force investigations into various acquisitions made before he was appointed as chief.
The investigations were on three acquisitions made by Olympus including the fees paid to an obscure financial advisor in 2008 worth $687 million over the acquisition of Gyrus, the British medical equipment.…
Bovington, T. (2011, December 13). No Risk Management System at 'Corrupted' Olympus.
Retrieved June 12, 2012, from http://www.rmprofessional.com/rm/olympus_committee_report.php
France-Presse, A. (2012, March 7). Olympus Corp ex-officials Charged in Scandal. Retrieved June 12, 2012, from http://www.rawstory.com/rs/2012/03/07/olympus-corp-ex-officials-charged-in-scandal/
Greenfield, K.T. (2012, February 16). The Story Behind the Olympus Scandal. Retrieved June
Internal Fraud Detection
Fraud can be detected by deliberate effort through internal control efforts or by coincidence or chance. When companies do not practice strong internal control, it leaves the door open for employees to misappropriate assets without being detected, except by chance. y the time fraud is detected by chance, it could have cost a company millions of dollars in misappropriated assets.
The first coincidence discovered by the magazine company was in the process of a new auditor in an effort to get to know his new company and their accounting codes taking invoices to a vice president responsible for approving payment on them. The very top invoice was a forged signature, and upon evaluation, more invoices were discovered to have contained forged signatures, which is what set up the investigation. According to (Global Economic Crime Survey), 13% of internal fraud is detected by accident, 27% reported fraud in…
Global Economic Crime Survey. Nov 2009. http://www.pwc.com/en_GX/gx/economic-crime-survey-2009.pdf . 18 Mar 2013.
Internal Controls and Fraud Proofing. 2013. article from http://www.aicpa.org/InterestAreas/ForensicAndValuation/...rnal%20Controls%20and%20Fraudproofing.aspx . 18 Mar 2013.