...A View of an Accounting Fraud and Litigation from Inside the Courtroom What the Jury Heard in the PharMor Case 1 In the Phar‐Mor case, several members of top management confessed to, and were convicted of, financial statement fraud. Certain of Phar‐Mor’s creditors and investors subsequently brought suit against Phar‐Mor’s independent auditor, Coopers & Lybrand, alleging the firm was reckless in performing its audits. A jury found the audit firm liable for fraud. While this module can only contain a very small portion of what the jury heard in the five‐month trial, we identify the most important points presented to the jury through a careful review of the trial transcripts and selected interviews with attorneys who were in the courtroom on a daily basis. Unless otherwise noted, all facts and statements are based on actual trial transcripts. Background The $500 million accounting fraud at Phar‐Mor, Inc., led to the bankruptcy of one of the largest private companies in the United States in 1992. As a result of the company’s fraud and subsequent failure, charges were filed against both Phar‐Mor’s management and the company’s auditors. Phar‐Mor’s former management was collectively fined just over $1 million, and two former members of Phar‐Mor management received prison sentences. The company’s former auditors, Coopers & Lybrand LLP (Coopers), faced claims of more than $1 billion, although final settlements were a small fraction of that amount...
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...internal controls, the report is referred to as an unqualified audit report. If the auditor had reservations about the effectiveness of the client’s internal controls, the auditor would issue an adverse opinion on internal controls. The auditors should find fraud, require accounting principles that best portray the spirit of the concepts adopted by accounting standard setters, and be independent of management. Managements need the unbiased and correct financial information to make operational decisions. Shareholders need the information to decide to invest or not. Tax authorities need the information to determine taxable income. 1-31: a) Describe the unethical actions of Susan Birkert. Susan Birkert told her friend the stock of Cometech Corporation that she was auditing was a good investment. Also, she agreed to her friend to purchase stocks on her behalf and she gave her friend $5,000 to make the purchase under his name rather than hers, because this way can keep independent. b) Compare and contrast the ideas of independence in fact and independence in appearance in the context of his case. Susan Birkert does not act independently but she appears independent, so this case was the ideas of independence in fact. Tthose stocks that purchased by her own money...
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...Christian Garland BUSI 472-B06 An Examination of Fraud in Business 6/2/14 Liberty University Abstract The paper will examine the concept of fraud in a business environment. Fraud is defined as any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression. There are many different kinds of fraud that can be committed, which include paying employees under the table, schemes, and tax irregularities. Some of these including paying employees under the table, committing schemes, and tax fraud will be examined in this paper. The consequences of these actions will also be displayed through example. This paper will consider the motivations behind why these types of fraud occur. There are many areas in which those in business today attempt to cut corners and figure out ways to get around the system in order to make more money. These occurrences are usually illegal and considered fraud. Fraud is defined by Ferrell and Fraedrich as, any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression. Fraud is a crime and convictions may result in fines, imprisonment, or both (Ferrell, Fraedrich, 2013). There are many different kinds of fraud that can be committed, which include paying employees under the table, schemes, and tax irregularities. Some of these cases will be further examined in this paper. When examining these scenarios it is important to determine what some motivating factors...
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...Swan: Analysis of the Statistical Evidence of Electoral Fraud in Venezuela Ricardo Hausmann Harvard University Roberto Rigobón Massachusetts Institute of Technology September 3, 2004 *This study was requested by Súmate who also provided the databases we used. We appreciate the great information gathering effort carried out by this organization. We are equally indebted to a hard working collaborator who, because of institutional reasons, must remain anonymous. We thank Andrés Velasco as well for his useful comments. The opinions expressed in this report and the errors we may have incurred are our responsibility and do not compromise either Súmate, or the universities to which we belong. 1 Abstract This study analyzes diverse hypotheses of electronic fraud in the Recall Referendum celebrated in Venezuela on August 15, 2004. We define fraud as the difference between the elector’s intent, and the official vote tally. Our null hypothesis is that there was no fraud, and we attempt to search for evidence that will allow us to reject this hypothesis. We reject the hypothesis that fraud was committed by applying numerical maximums to machines in some precincts. Equally, we discard any hypothesis that implies altering some machines and not others, at each electoral precinct, because the variation patterns between machines at each precinct are normal. However, the statistical evidence is compatible with the occurrence of fraud that has affected every machine in a single precinct,...
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...Introduction As we enter new millennium, it is a fact that the user of financial statement demanded more on audit function to implement audit attestation towards company’s financial statement whether for public listed or private company. It is due to their awareness of having a true and fair presentation of financial statement since they evaluate the company’s performance based on the company’s earnings which used to be the point at which the investors can make decision whether to invest or not. However, the case of fraud and manipulation in a company are still critical and need to be monitored by certain functional department as such to be the whistle blower for any irregularities that may arise in the company. In fact, over the last decade, there were various regulatory agencies and interest groups in existence which had been aggressively promoting the idea of an effective audit committee in all public listed companies. Yet, the absence of audit committee in a private company might be the cause for unstoppable practices of fraud. Therefore, the objective of this study is to determine whether the new theory of this formation of audit committee in a private company, can really help to eliminate or at least minimize the fraud. To achieve this goal, the study will conduct a survey based on questionnaires that will be distributed to the top management of a private companies, charted accountant i.e auditors and lecturers of audit course. The findings will be used to support the...
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...Koss Corporation Part A The overall control environment at Koss Corporation in the years leading up to the fraud was inadequate. The structure of the Board of Directors was poor and the management did not place enough importance on financial reporting. These reasons allowed Ms. Sujata Sachdeva easily make unauthorized wire transfers, without being caught by either the management or the auditors – the people responsible for detecting fraud. The poor structure of the Board of Directors was one of the main reasons that the unauthorized transactions went unnoticed. First, there was only one person managing and assessing the internal control system. According to the Sarbanes-Oxley Act (SOX), non-accelerated filers require the CEO and CFO to separately perform an assessment on the internal controls over financial reporting (ICFR). However, in the case of Koss Corporation, both the CEO and CFO were the same person – Michael Koss. Therefore if he implemented a defective the internal control system, there was nobody there to correct him. Furthermore, the company’s auditor, Grant Thornton, was not required to, nor did they assess the effectiveness of the ICFR. They simply designed their audit of financial statements based on the manager’s report of the ICFR. Consequently, if Michael Koss incorrectly told Grant Thornton that the company had an effective ICFR, Grant Thornton probably designed a financial statement audit with little skepticism. Another problem with the structure of...
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...Table of Contents 1. Introduction ............................................................................................................................ 2 2. Origin and Legal Development .............................................................................................. 2 2.1 Origin of the Incontestable Clause .............................................................................. 2 2.2 Evolution and Legal Development .............................................................................. 3 3. Effects of the Incontestable Clause ...................................................................................... 5 3.1 Advantages .................................................................................................................... 5 3.2 Disadvantages................................................................................................................ 6 4. Applications ............................................................................................................................ 8 4.1 Characteristics ............................................................................................................... 8 4.2 Interpretation and Application in Hong Kong ............................................................. 9 5. Conclusion .......................................................................................................................... 10 6. Recommendations ......................
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...to sell fiat car. Y does not know that X has two cars. Y offers to buy X's Maruti car Rs 50,000. X accepts the offer thinking it to be an offer for his Fiat car. Here, there is no identity of mind in respect of the subject of the subject matter. Hence there is no consent at all and the agreement is void ab-initio. Meaning of Free consent: It is one of the essential elements of a valid contract as it is evidenced by section 10 which provides that all agreements are contracts if they are made by the free consent of the parties... according to section 14, consent is said to be free when it is not caused by (a) Coercion, or (b)Undue influence, or (c) Fraud, or (d) Misrepresentation, or (e) Mistake. Effect of Absence of free consent: When there is consent but it is not free (i.e. when it is caused by coercion or undue influence or fraud or misrepresentation), the contract is usually voidable at the option of the party whose consent was so caused. COERCION Meaning of coercion[section 15]: It means compelling a person to enter into a contract, by use of physical force/activities forbidden by Indian penal code, OR threatens to do activities forbidden by I.P.C, OR threatens to damages the property. Effect of coercion: Voidable and can be canceled at the option of aggrieved party. OR A 'suicide and a...
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...Exposing the Psychological: Fraudulent Actions in Accounting Kareem R. Nuru Savannah State University Abstract My study is about going through the mind of an fraudulent accountant and visualizing the process of committing this crime and why. By figuring out this process maybe businesses and corporations can have an early detection and prevent the fraudulent act before it destroys a company. Psychologically the mind of a human is set up in different ways that people cannot understand the motive of fraud. What if psychology is the key to figuring out questions that every company wonders? For instants, Why is accounting fraud happening? Where it usually happens? How can accounting fraud being done? What causes accountants to commit this action? When can companies detect accounting fraud? Keywords: Fraud, Detect, Prevention, Accounting, Fraudulent, Mind, Psychology, Crime Introduction Worries about fraud have been of down to earth noteworthiness for whatever length of time that composed records have been kept, and for sure may be a noteworthy purpose behind the advancement of composing and record keeping. A great part of the extortion writing begins with a recitation of scandalous bookkeeping and corporate outrages and cheats, and these regularly energize open intrigue and concern. Worry with misrepresentation and cubicle wrongdoing influences open trust in organizations as differing as securities exchanges, ...
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...NEED TO ADD THE TITTLE • Research Paper Topic: • What are Auditors’ Responsibility Today to Detect Fraud; include how do these responsibilities fit into the professional practices of: external auditors, Certified Public Accountants in public practice and Internal Auditors and what has changed in these areas in recent years? For standards or articles use the following items as they relate to your paper to help organize your paper. Statements on Auditing Standards (SAS), especially all those statements relating to fraud, Financial Accounting Standards Board (FASB), International Financial Reporting Standards (IFRS), Sarbanes-Oxley Act , etc. (SOX, Sarbox); International Standards for the Professional Practice of Internal Auditing (Standards), European Confederation of Institutes of Internal Auditing (ECIIA), Committee of Sponsoring Organizations of the Treadway Commission (COSO) , Public Company Accounting Oversight Board (PCAOB)and its standards, and professional articles or books as primary sources. • • • • PLEASE HELP ME OUT EDITING THIS PAPER, SENTENCE STRUCTURE, ADD SENTENCES IF NEEDED I’M LOOKING FORWARD TO AN A PAPER AFTER THIS PROOF READING Thank you in advance please help • Auditors’ Responsibility to detect Fraud today Public companies are required by the SEC to prepare and issue financial statements that made a fair presentation of the companies’ performance. The SEC also stipulates that the companies whose shares...
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...Credit card fraud General purpose-to inform the audience Specific purpose -to inform my audience about credit card fraud Thesis – I will be discussing the ways, its prevention and how to go about when hit by credit card fraud. Introduction: I believe most of us make use of credit card often but just in case this is what a credit card looks like (show a physical example of credits card). There has been major cases of credit card fraud in the past years (give statistics/facts). Today I am going to inform you about the ways credit card fraud occurs, how to prevent this and what to do if you get hit by this. I would be informing you about two different ways credit card fraud occurs Body A. Ways credit card fraud occurs -skimming -phishing It’s really easy to fall victim of this tricks. How do you prevent this? B. How to prevent credit card fraud * Protecting of personal information * Installation of firewall on computers * Regular checking of financial statements What if everything is done right and still get hit by this fraud. How do you go about this? C. Solutions to those who suspect are victims of credit card fraud -inform all financial institutions ASAP - inform all three credit agencies. As you can see, you can always recover your loss using this steps Conclusion Having explained the form in which credit card fraud occur, its prevention and solution .the rate at which this trend continues is rapid. To find more about...
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...Question #1 Using an Internet news search, find an example of a business that has abused its power and encountered the wrath of social interest groups or the government. Using content, concepts, and class discussion points from chapters 1 – 3, introduce and discuss the situation and the current state. Conduct a stakeholder analysis and make recommendations for an improved outcome, using the same resources. Support your discussion with evidence from reputable resources, as well as content and concepts from the text. ANSWER I was overwhelmed while doing the internet news search to find an example of business that has abused its power. The search came up with so many examples that it made me realize that probably all the business abuse their position in some or the other way. There were many example to choose from but I chose “Corporate accounting scandal at Satyam “, which is also infamously called as India’s Enron. The reason why I selected this particular company is that I had my cousin brothers and sisters working for this company and this scandal affected our families in a big way. The background Scandals are like an iceberg, they represent the only visible catastrophic failure. Saytam Computers was founded By Mr. Ramalinga Raju who hailed form a traditional agriculture family of Andhra Pradesh, India in 1987 with a just 20 employees and converted the company got Public in 1992.The chairman of the company was the founder himself, Mr. Ramalinga Raju (Alias Raju) until...
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...through many changes as a result of scams such as the Enron and WorldCom. It came stated as a clear fact that since these scandals had unfortunately happened, it would create a new demand for forensic accountants. The Association of Certified Examiners said that occupational fraud losses cost organizations on the average of about a trillion dollars yearly. I feel with this being a known fact brings along the push for the services of these forensic accountants. Forensic accounting is a profession in which combines investigative skills with accounting, auditing, and consulting to conduct investigations. Investigations which involve forensic accountants range from embezzlement at small retail business to a widespread of government corruption. When companies are yearly losing about a trillion dollars to fraud losses I feel that is a main reason as to why there was an explosion in this field. With this explosion taking place of forensic accountants, the American Institute of Certified Public Accountants (AICPA) formed a committee called the Certified Financial Forensics (CFF) in which was planned to award 900 credentials by the end of 2008. In was said that by the end of 2009 the AICPA rewarded 3,500 CFF certifications. Through research and the readings, I think it is simple to say that no one ever wanted to see a repeat such as the Enron and WorldCom scams. I came to find that through the readings that the marketplace in which requires forensic accountant’s posses a complete...
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...Health Insurance Fraud By: WAHEED ALKHAMEES KHALED ALNAFEE Further Issues Hospital Administration PA 551 Master of Health and Hospital Administration (Parallel) King Saud University One:- Introduction Definition Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. An insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount of money to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated. Types of Insurance Services Insurance can take a number of different forms. Some of these types: Auto insurance Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as...
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...After an elderly couples helps a young man who is stranded due to a snowstorm, his father promises to pay them $500 in appreciation. The elderly couple accepts his offer, as they are not flush with money. However after a dispute between the father and son, the father backs out of the deal. Can the elderly couple hold the father liable for the services rendered to Daniel? Legal consideration can be broken down into two parts: “(1) something of legally sufficient value must be given in exchange for the promise; and (2) usually, there must be a bargained-for exchange.” (Clarkson, Miller, & Cross, 2012, p. 223) In a bilateral contract it consists of a promise in return for a promise. In a unilateral contract there is a promise in return for performance. In the case stated above past consideration would be the legal standard. In past consideration there is “no consideration”. Because the father promised payment for an action that already occurred, this promise is unenforceable. There was no bargained-for exchange between the two parties prior to their taking the young man in. While the father may be morally bound to his word, if the couple took him to court, the courts would not remand him to pay the $500 to the couple. Had the son or father offered to pay them prior to the couple providing him food and shelter then there would have been legal ground to stand on. 13-3 - Capacity A widowed seventy-five-year-old woman named Joanne survives on a fixed budget and has recently...
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