...ACCOUNTING FRAUDS CONTENTS WHAT ARE FRAUDS? | WHAT ARE ACCOUNTING FRAUDS? | NOTABLE FRAUDS | NOTABLE OUTCOMES | MANIPULATION & FALSIFICATION OF RECORDS | MISAPPROPRIATION OF CASH BALANCES | MISAPPROPRIATION OF GOODS | TEEMING & LADING | WINDOW DRESSING | SECRET RESERVES | ENRON FRAUD | WORLDCOM FRAUD | WHAT ARE FRAUDS ??? FRAUDS AND THEIR CHARACTERISTICS Misstatements in the financial statements can arise from fraud. In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual, Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud Industries most commonly effected by fraud are banking, manufacturing, and government. Fraud can be committed through many media, including mail, wire, phone, and the Internet (computer crime and Internet fraud). * The term “fraud” refers to an intentional act by one or more individuals among management, those charged with governance, employees or third parties, involving the use of deception to obtain an unjust or illegal advantage. Although fraud is a broad legal concept, the auditor is concerned with fraudulent acts that cause a material misstatement in the financial statements. Misstatement of the financial statements may not be the objective of some frauds. Auditors do not make legal determinations of whether fraud has actually occurred. Fraud involving one or more members of...
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...REPORT OF INVESTIGATION BY THE SPECIAL INVESTIGATIVE COMMITTEE OF THE BOARD OF DIRECTORS OF WORLDCOM, INC. Dennis R. Beresford Nicholas deB. Katzenbach C.B. Rogers, Jr. Counsel Wilmer, Cutler & Pickering Accounting Advisors PricewaterhouseCoopers LLP March 31, 2003 I. SUMMARY AND CONCLUSIONS ................................................................................. 1 A. The Nature of the Accounting Fraud....................................................................... 9 1. 2. B. C. D. E. Reduction of Reported Line Costs .............................................................. 9 Exaggeration of Reported Revenues ......................................................... 13 WorldCom’s Culture ............................................................................................. 18 Compromising Financial Arrangements ............................................................... 24 Why WorldCom’s Auditors Did Not Discover the Fraud..................................... 25 WorldCom’s Governance...................................................................................... 29 1. 2. 3. 4. Board’s Lack of Awareness of Accounting Fraud .................................... 29 Adequacy of Board’s Oversight of Company ........................................... 30 Stock Sales ................................................................................................ 33 Lease of Airplane to Chairman of Compensation Committee ......
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...More Than a Numbers Game A Brief Histor y of Accounting Thomas A. King John Wiley & Sons, Inc. More Than a Numbers Game More Than a Numbers Game A Brief Histor y of Accounting Thomas A. King John Wiley & Sons, Inc. Copyright © 2006 by Thomas A. King. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability...
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...Accession Number: 102270931 Full Text: The Accounting profession is undergoing very trying times. The actions of a few have transformed it from one of the most highly respected professions to one that is now far less valued. The authors recount recent events which have served to discredit the profession. They examine current legislative reaction to these events, and provide an analysis of what can be done to regain Accounting's status. Introduction The rash of recent accounting-related indiscretions has left the profession tarnished. Not long ago, the accounting profession was among the most admired. What must accountants do to regain the trust they once enjoyed? The mistakes of the past must not be repeated. Indeed, fundamental changes are needed. The Government will certainly be an intervening factor, and its influence is now inevitable. Some would say that misleading practices contributed to the hyper growth of the stock market during the 1990's. (1) What actually happened is that the grand expectations of the stock market put great pressure on management to continuously outperform from year to year. Companies routinely presented analysts with 15% growth annually. "Making the numbers" depended on it. With such a mindset, it's no wonder that management was compelled to manipulate the numbers. There is tremendous pressure to find creative ways to inflate revenue when a salary bonus depends on making or exceeding a number. Consequently, the auditor invariably gets...
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...Market Solutions to the Agency Problem in Periodic Financial Reporting Edgar Carlos Duarte Aguilar “The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be as dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.” Adam Smith Introduction Enron’s bankruptcy in 2001 was a milestone in recent times as far as corporate governance regulations it is concerned. Besides the executives, the external auditors were accused and found guilty as accomplices in distorting the accounting information the Securities and Exchange Commission (SEC) required from them as a public company that traded its securities in the New York Stock Exchange (NYSE). US Government’s reaction was to increase the regulation on the activities performed by all public companies by issuing the Sarbanes-Oxley Act (SOA) and creating the Public Company Accounting Oversight Board (PCAOB). It was now required that the Chief Financial Officer (CFO) of each company signed a statement on the effectiveness of the Company’s internal control and that the external auditors issued a report on this management’s statement, besides their previously required report on the fair presentation of its financial statements....
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...WorldCom: The Scandal that Shocked the Nation By: Eric Dixon FSAAC_624_OL2 November 23, 2011 Professor Stephen Oliner Table of Contents Executive Summary…………………………………………………………Page 2 Corporate Environment……………………………………………………...Page 4 Types of Fraud Committed.…………………………………………………Page 5 Board of Directors Responsibility…………………………………………...Page 6 Internal Auditors Responsibility…………………………………………….Page 7 Conflicts of Interest………………………………………………………….Page 7 Collusion…………………………………………………………………….Page 8 Complicity of Auditors and Investment bankers …………………………...Page 9 Sarbanes Oxley-Act……………………………………………………….....Page 9 Recommendations……………………………………………………………Page 10 Re-establishing WorldCom………………………………………………….Page 11 Glossary………………………………………………………………...……Page 12 Appendix…………………………………………………………………….Page 13 Web Site Resource Summary……………………………………………......Page 14 Executive Summary In the late 1990’s WorldCom was regarded as one of the largest long distance phone companies. WorldCom stormed and dominated the telecommunication industry by completing sixty-five significant mergers and acquisitions. These mergers put WorldCom in debt of $41 billion dollars, which the Board of Directors was unaware of. By obtaining these companies WorldCom made themselves a favorite on Wall Street and to numerous investment bankers. Management didn’t know the complications that would arise when trying to integrate several different billing systems. Chief Executive Officer Mr. Ebbers kept...
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...Verizon Communications Inc. Financial Management Analysis Table of Contents Executive Summary 4 Mission Statement 5 Vision Statement 5 History 5 Business Summary 9 Financial 10 Employees 10 Products Offered 11 Wireless 11 Enterprise/Mid-Market Business 12 Key Enterprise Products and Services 12 Residential/ Small Business 13 Key Residential and Small Business Products and Services 13 Community Work 14 Fast Facts 15 Customers and Target Market 15 Financial Ratios Balance Sheet Balance Sheet Financial Analysis Income Statement Analysis Cash Flows Statement and Analysis WACC Calculation Financial Planning Forecast Forecast Analysis Forecasted Balance Sheet and Analysis Forecasted Income Statement and Analysis Conclusion [pic] Executive Summary Verizon Communications, Inc., with Headquarters in New York City; Operations Center in Basking Ridge, N.J. is a Dow 30 company and the most reliable wireless network with 106.3 million total connections. Verizon, a global leader in providing broadband and other wireless and wire line communications services to mass market, business, government and wholesale customers; operates nearly 143.7 million customer connections (wireless, wire line, broadband and TV) served every day. Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic...
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...FIDUCIARY DUTIES AND OTHER RESPONSIBILITIES OF CORPORATE DIRECTORS AND OFFICERS Morrison & Foerster LLP Christopher M. Forrester Celeste S. Ferber RR DONNELLEY EZ START XBRL We Tag. You Validate. We File. With the release of the proposed rule, the SEC will require the use of XBRL for financial reporting starting as early as 2009 for some companies. RR Donnelley is uniquely qualified to give you guidance on how your company can prepare for the SEC mandate. As the market leader in XBRL filings, we have been helping leading companies successfully tag and file XBRL financials since the inception of the SEC Voluntary Filing Program. RR Donnelley’s proven EZ Start XBRL full-service solution is designed to save you crucial time. With EZ Start, we do the initial tagging for you, reducing the time spent mapping and validating XBRL tags to under ten hours. Our goal is to transfer knowledge to your financial team to ensure a firm understanding of the taxonomies, mapping process and SEC requirements. To learn more, visit www.tryxbrl.com. FIDUCIARY DUTIES AND OTHER RESPONSIBILITIES OF CORPORATE DIRECTORS AND OFFICERS MORRISON & FOERSTER LLP Christopher M. Forrester Celeste S. Ferber RR Donnelley Global Capital Markets Copyright© 2008 Morrison & Foerster LLP (No claim to original U.S. Government works) All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic...
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...Enron and World Finance A Case Study in Ethics Edited by Paul H. Dembinski, Carole Lager, Andrew Cornford and Jean-Michel Bonvin Enron and World Finance Also by Observatoire de la Finance From Bretton Woods to Basel Finance & the Common Good/Bien Commun, no. 21, Spring 2005 Ethics of Taxation and Banking Secrecy Finance & the Common Good/Bien Commun, no. 12, Autumn 2002 Will the Euro Shape Europe? Finance & the Common Good/Bien Commun, no. 9, Winter 2001–2 Dommen, E. (ed.) Debt Beyond Contract Finance & the Common Good/Bien Commun, Supplement no. 2, 2001 Bonvin, J.-M. Debt and the Jubilee: Pacing the Economy Finance & the Common Good/Bien Commun, Supplement no. 1, 1999 Dembinski, P. H. (leading contributor) Economic and Financial Globalization: What the Numbers Say United Nations, Geneva, 2003 Enron and World Finance A Case Study in Ethics Edited by Paul H. Dembinski Carole Lager Andrew Cornford and Jean-Michel Bonvin in association with the Observatoire de la Finance Selection, editorial matter and Chapters 1, 2 and 16 © Observatoire de la Finance Remaining chapters © contributors 2006 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence ...
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...Enron and World Finance A Case Study in Ethics Edited by Paul H. Dembinski, Carole Lager, Andrew Cornford and Jean-Michel Bonvin Enron and World Finance Also by Observatoire de la Finance From Bretton Woods to Basel Finance & the Common Good/Bien Commun, no. 21, Spring 2005 Ethics of Taxation and Banking Secrecy Finance & the Common Good/Bien Commun, no. 12, Autumn 2002 Will the Euro Shape Europe? Finance & the Common Good/Bien Commun, no. 9, Winter 2001–2 Dommen, E. (ed.) Debt Beyond Contract Finance & the Common Good/Bien Commun, Supplement no. 2, 2001 Bonvin, J.-M. Debt and the Jubilee: Pacing the Economy Finance & the Common Good/Bien Commun, Supplement no. 1, 1999 Dembinski, P. H. (leading contributor) Economic and Financial Globalization: What the Numbers Say United Nations, Geneva, 2003 Enron and World Finance A Case Study in Ethics Edited by Paul H. Dembinski Carole Lager Andrew Cornford and Jean-Michel Bonvin in association with the Observatoire de la Finance Selection, editorial matter and Chapters 1, 2 and 16 © Observatoire de la Finance Remaining chapters © contributors 2006 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying...
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...Student ID: 082168461 The impact of the Sarbanes-Oxley Act on Corporate Governance and US Companies An examination to determine the impact of the Sarbanes Oxley Act, the costs and benefits of its implementation and how it has affected Corporate Governance and US Companies. Table Of Contents 1. Abstract...................................................................................................................... 4 1.1 Introduction ................................................................................................. 4 1.2 Methodology................................................................................................ 4 1.3. Limitations .................................................................................................. 5 1.4 Analysis and conclusion .............................................................................. 5 1.5 Further research ........................................................................................... 6 2. Literature Review: An Overview of Corporate Governance ..................................... 6 2.1 United Kingdom ........................................................................................ 14 2.2 Self-regulation prior to SOX ..................................................................... 18 3. Literature Review: The SOX Act ................................................................ 19 3.1 Enron, the trigger to SOX? ....................................
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...FINANCIAL ACCOUNTING INFORMATION AND THE RELEVANCE/IRRELEVANCE ISSUE (Global Business & Economics Review Volume 5 No.2 December 2003 pp:140-175) Stanley C. W. Salvary, Canisius College ABSTRACT Some current research conclude that the numbers in financial statements are not relevant for three basic reasons. The numbers: (1) are not isomorphic with capital market values, (2) do not have a future orientation, and (3) are un-interpretable since they are based upon five different measurement attributes. The lack of isomorphism argument is invalid since actual current performance is not identical with the capital market expectations of future performance. The lack of a future orientation argument is invalid since financial statements capture what has happened and not what is expected to happen. Since a single measurement attribute is required to produce meaningful measures, the un-interpretability argument holds. A unique measurement attribute is identified in this paper to address this problem I. INTRODUCTION In Statement of Financial Accounting Concepts No. 1: Objectives of Financial Reporting by Business Enterprises (SFAC1) [1978], the Financial Accounting Standards Board (FASB) maintains that the function of financial accounting is to generate information useful to a group of users (investors and creditors) for decision-making. The focus on that specific function (decision-making) leads to a concern for predictive value, as opposed to feedback value, in financial statements...
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...Fourth Edition Financial & Managerial Accounting for MBAs Peter D. Easton Robert F. Halsey Mary Lea McAnally Al L. Hartgraves Wayne J. Morse Cambridge Business Publishers To my daughters, Joanne and Stacey —PDE To my wife Ellie and children, Grace and Christian —RFH To my husband Brittan and my children Loic, Cindy, Maclean, Quinn and Kay. —MLM To my wife Aline. —ALH To my family and students. —WJM Cambridge Business Publishers FINANCIAL & MANAGERIAL ACCOUNTING FOR MBAs, Fourth Edition, by Peter D. Easton, Robert F. Halsey, Mary Lea McAnally, Al L. Hartgraves, and Wayne J. Morse. COPYRIGHT © 2015 by Cambridge Business Publishers, LLC. Published by Cambridge Business Publishers, LLC. Exclusive rights by Cambridge Business Publishers, LLC for manufacture and export. ALL RIGHTS RESERVED. No part of this publication may be reproduced, distributed, or stored in a database or retrieval system in any form or by any means, without prior written consent of Cambridge Business Publishers, LLC, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Student Edition ISBN 978-1-61853-102-5 Bookstores & Faculty: to order this book, call 800-619-6473 or email customerservice@cambridgepub.com. Students: to order this book, please visit the book’s website and order directly online. Printed in the United States of America. 10 9 8 7 6 5 4 3 2 1 About the Authors ...
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...Chapter 4 Ethical and Social Issues in Information Systems LEARNING OBJECTIVES After reading this chapter, you will be able to: 1. Analyze the relationships among ethical, social, and political issues that are raised by information systems. 2. Identify the main moral dimensions of an information society and specific principles for conduct that can be used to guide ethical decisions. 3. Evaluate the impact of contemporary information systems and the Internet on the protection of individual privacy and intellectual property. 4. Assess how information systems have affected everyday life. CHAPTER OUTLINE 4.1 UNDERSTANDING ETHICAL AND SOCIAL ISSUES RELATED TO SYSTEMS A Model for Thinking About Ethical, Social, and Political Issues Five Moral Dimensions of the Information Age Key Technology Trends that Raise Ethical Issues ETHICS IN AN INFORMATION SOCIETY Basic Concepts: Responsibility, Accountability, and Liability Ethical Analysis Candidate Ethical Principles Professional Codes of Conduct Some Real-World Ethical Dilemmas THE MORAL DIMENSIONS OF INFORMATION SYSTEMS Information Rights: Privacy and Freedom in the Internet Age Property Rights: Intellectual Property Accountability, Liability, and Control System Quality: Data Quality and System Errors Quality of Life: Equity, Access, and Boundaries HANDS-ON MIS Developing a Web Site Privacy Policy: Dirt Bikes USA Achieving Operational Excellence: Creating a Simple Web Site Using Web Page Development Tools Improving Decision Making: Using...
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...Academy of Management Journal 2012, Vol. 55, No. 1, 213–233. http://dx.doi.org/10.5465/amj.2009.0530 OFFSETTING ILLEGITIMACY? HOW PRESSURES FROM SECURITIES ANALYSTS INFLUENCE INCUMBENTS IN THE FACE OF NEW TECHNOLOGIES MARY J. BENNER University of Minnesota RAM RANGANATHAN University of Pennsylvania We study how analysts’ recommendations affect firms’ strategies during radical technological shifts. We find, from our study of firms in three industries undergoing technological change, that analysts’ recommendations trigger changes in strategic investments during periods of uncertain technological change. We also find that firms that make high investments despite negative analysts’ recommendations announce a higher value of share repurchases, an action that may offset the growing illegitimacy of these increased investments by signaling alignment with shareholders’ interests. Radical technological changes provide a source of exogenous variation that contributes to explanation of how firms balance technological pressures for adaptation and institutional pressures for legitimacy. The challenges and opportunities for firms faced with technological changes in their environments have been documented in a large body of organization and strategy research (e.g., Agarwal & Helfat, 2009; Christensen & Bower, 1996; Cooper & Smith, 1992; Henderson & Clark, 1990; Tushman & Anderson, 1986). Prior research has explored the difficulties firms face developing the new knowledge and capabilities required...
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