...resources available for you to conduct research, download financial statements, and increase your general knowledge about current accounting issues. In Cases 2 and 3, you will solve unstructured problems like you will do in the real-world. 2. HOW DO I USE THE DATABASES? Download the Accounting Research Handbook that is now available on WebCampus. Included in this booklet are detailed instructions on how to use these databases. This handbook will give you enough information to get you started. (The following pages may be turned into me – you do not need to type up your responses in a separate document. If you are working with a partner, make sure BOTH of your names appear on the assignment). ACCOUNTING RESEARCH CASE 1 – PART A: SEC EDGAR DATABASE This first exercise involves EDGAR, the SEC’s database. You will use EDGAR to find out information about one company. Your company is based on the first letter of your last name. Using the table below, determine which company you are assigned. At the EDGAR home page (www.sec.gov), go to “Company Filings Search” under the heading “Filings.” On the new screen, search by company name (EDGAR is picky about the exact form of the company name, so you may want to click the “contains” button.)...
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...The Cost of Capital for Goff Computer, Inc. BUS650: Managerial Finance (MAH1209A) Dr Charles Smith March 18, 2012. The Cost of Capital for Goff Computer, Inc.: 1. Most publicly traded corporations are required to submit 10Q (quarterly) and 10K (annual) reports to the SEC detailing their financial operations over the previous quarter or year, respectively. These corporate fillings are available on the SEC Web site at www.sec.gov. Go to the SEC Web site, follow the “Search for Company Filings” link, the “Companies & Other Filers” link, enter “Dell Computer,” and search for SEC filings made by Dell. Find the most recent 10Q and 10K and download the forms. Look on the balance sheet to find the book value of debt and the book value of equity. If you look further down the report, you should find a section titled either “Long-term Debt” or “Long –term Debt and Interest Rate Risk Management” that will list a breakdown of Dell’s long-term debt. Answer: The book value of a company's equity is the same as stockholder's equity, which can be computed by subtracting the total value of liabilities from total assets. (Total Assets) = (Total) Liabilities + Stockholder's Equity (book value of equity). Stockholder's Equity (book value of equity) = Total Assets –Total Liabilities. The book value of the company’s liabilities and equity was found from the site http://www.sec.gov . I found Dell’s Form 10K, dated January 28, 2011, and snap shot is attached here with. Dell’s...
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...Perceptual Map Situation Analysis The Situation Analysis will help your company understand current market conditions and how the industry will evolve over the next eight years. The analysis can be done as a group or you can assign parts to individuals and then report back to the rest of the company. An online version of the Situation Analysis is available in the Getting Started area. (customers want better performing products) and for size is -0.7 (customers want smaller products). At the end of Round 1 the center of the Traditional segment will have a performance of 5.7 and a size of 14.3. 5.0 + 0.7 = 5.7 and 15.0 - 0.7 = 14.3 Table 2 displays the segment center locations at the end of each round. Print the Perceptual Map Form in the Industry Conditions Report then use Table 2 to find the location of each segment center for Rounds 1 through 8. Mark the approximate locations on the form (see the example in Figure 1). Remember, the locations in Table 2 are the centers of the segment circles, not product positions. Product positions are reported on page 4 of The Capstone Courier. The exercises require two reports: The Industry Conditions Report and The Capstone Courier, which are available from the website’s Reports link. The Courier is also available from the Capstone Spreadsheet’s Reports menu bar. The Courier available at the start of Round 1 displays the results for Round 0, when all companies are equal. If you access the report from the website, use the Round 0...
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...decent salary and stock options that make other companies within the industry jealous. How many other middle managers in the industry can claim a net worth of over one million dollars? During WorldCom’s highest point, some of the middle managers could honestly make such a claim because they had so much stock and the price seemed to just keep going up and up. The stock splits, and because of the stock option, instead of a dividend the employees get more stock. Then all of a sudden one March morning all these millionaire managers wake up to discover they are not only now worth just a few hundred bucks, but that their jobs were disappearing. This situation was a reality for many WorldCom workers, because on that March morning America’s largest fraud at the time had been reported. WorldCom was a publicly traded corporation established in 1983 to provide Long Distance Discount Services (LDDS) (Internet Services, 2011). Through the acquisition of other businesses Worldcom became the world’s second largest telecommunication company. LDDS began by leasing a wide-area telecommunications service (WATS) line and resold time to other businesses (Internet Services, 2011). WATS is a form of fixed-rate long distance telecommunication service in which certain area codes, such 800, 888, or 877, are reserved for businesses and when customers call these numbers they are not charged for long-distance but rather the business is charged as a subscriber of the WATS service (Rouse, 2006). Beginning...
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...Accounting Fraud” written by Jonathan B. MacKenzie (http://www.law360.com/articles/460715/sec-s-new-focus-on-accounting-fraud-what-s-on-its-radar). Accounting fraud cases brought by the SEC have been decreasing in recent years. As shown in the graph below, the financial fraud matters brought by Enforcement became 11% in 2012 fiscal year compared to 29% in 2003 fiscal year. During those years from 2003 to 2012, the total enforcement actions by the SEC did not decrease. Data source: http://www.sec.gov/news/newsroom/images/enfstats.pdf From the decline trend of percent, there could be two main questions. First, what are the causes to this decline trend? The next one is how long it will keep the momentum. The decline trend in recent years seems to be logically explained by two possible scenarios. One is that financial reporting has actually improved after the Sarbanes-Oxley legislation in 2002. The other is that financial fraud remained the same level as before, but less fraud has been detected due to shifted priorities at the SEC. The examples include restructuring of the Enforcement Division, in 2009, into five specialized units, missing emphasis on detecting financial fraud and disbanding the Financial Fraud Task Force, established in 2000, in 2010. I think the recent decline trend of fraud matters brought by the SEC is the result of both of improved financial reporting and the shifted priorities at the SEC. Running single regression model for Financial Fraud/Issuer...
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...a higher 'truth' value than others. As a consequence they easily become generally accepted, sometimes even considered as absolute truths that are not easily questioned". Businesses, non-profit agencies and even the government are all victims of both fraud and theft on a daily basis. Business owners are sometimes blindsided by these actions and may be unaware of the fraud due to lack of accounting experience or expertise. In almost every community, large or small, there are news stories about theft from employees. In several cases, unfortunately, the theft is from those entrusted to perform accounting functions. By the time fraud or theft is detected, sometimes thousands and even millions of dollars are already missing. Another downfall of accounting fraud and theft is the potential for customers and investors to lose confidence in the company or organization’s management. According to the Federal Bureau of Investigation (FBI), some cases of accounting fraud and theft or not even reported. Companies fear the bad press that is associated with reporting internal crimes. Like anything else, the best protection for accounting fraud and theft is prevention. International Corporate Fraud Trend Corporate frauds are likely to be uncovered in many countries. In the leading...
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...Whistleblowing and Sarbanes-Oxley Act Student Name College or University Name LEG500 – Law, Ethics, and Corporate Governance Professor’s Title Date Whistleblowing and Sarbanes-Oxley The federal government passed and put into law the Sarbanes-Oxley Act of 2002 (SOX) to primarily protect whistleblowers from retaliation for reporting corporate fraud and financial malfeasance to the government. The negligence became apparent in the 1990’s when corporations such as Enron, HealthSouth, Tyco and WorldCom were found to have grossly overstated their earnings. This cost billions of dollars in losses to shareholders and caused the near-collapse of the stock market (Prentice, 2010, p. 17). The companies were able to hide, scam or misrepresent their earnings due to the dot-com boom, soaring investments, and auditor fraud. The Sarbanes-Oxley Act contains many sections, sub-sections and creation of other agencies to enforce it. It was a sweeping change to standard reporting practices and was created to restore investor confidence, hold corporations and auditors financially and criminally accountable, and protect whistleblowers. Prior to the creation of SOX the whistleblower had no protection from retaliation by the organization. Whistleblowers had fears of criminal prosecution, bodily harm and job loss if they reported the misdeeds of their employer both publicly and privately. The Sarbanes-Oxley Act of 2002 redefined the whistleblower. An examination of the characteristics of a whistleblower...
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...Angelica Olivarez 430 ethics Fannie Mae Accounting Scandal 2001 Ethics is based on how people should act through well-based standards. Ethics on the other hand, does not describe the way people actually act. Ethics is a prescriptive term in which people should always aim to make the right decision. Those who act on ethics do not rationalize their actions founded own perceived self-interest. The accounting profession has its own understanding and framework of ethics. Accounting applications of ethical reasoning can become a common dilemma faced by auditors, internal auditors and all others who work in the business field. For example, The American Institute of Public Accountants (AICPA) Code requires CPAs to place the interest of the public first. To place the interest of the public first means that CPAs should not place themselves, their client or their employer’s interest above the public. Many business dilemmas involve managers, CPAs, and/or top management who have placed their interest above the public’s interest. An example of an accounting and business dilemma where the public interest was not placed first is Fannie Mae accounting scandal in 2001. Fannie Mae is the Federal National Mortgage Association, a government supported entity that assist lower and middle income Americans to buy homes. The Federal Home Loan Mortgage Corporation (Freddie Mac) also assists lower and Middle Americans to buy homes. Both supported entities gain special treatment and “aimed to increase...
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...economy. Audits, which were conducted to assess the validity and reliability of a company’s financial statements, were not detecting the material misstatements in the statements. As a result, both the US Government and the accounting profession needed to come up with a way to prevent these immense frauds from occurring in the future. As a response to these large frauds, in 2002, the US Government passed the Sarbanes – Oxley Act of 2002 (SOX) and the American Institute of Certified Public Accountants (AICPA) issued Statement on Auditing Standards No. 99(SAS No. 99) to improve investor confidence and the auditing function’s ability to detect material frauds. The intent of this thesis was to look at the fraudulent factors associated with several recent corporate frauds and compare them to the standards set by SAS No. 99. Through the analysis conducted, this thesis looks at the relationships between pressures, opportunities, and rationalizations made during the act of fraud. Table of Contents ABSTRACT ii INTRODUCTION 1 Sarbanes – Oxley Act of 2002 (SOX) 1 Statement of Auditing Standards Number 99 (SAS No. 99) 4 Parts of the Fraud Triangle 5 Types of Fraud 11 INSTANCES OF FRAUD 13 Enron Corporation 13 Adelphia Communications Corporation 17 AOL Time Warner, Inc. 20 Bristol-Myers Squibb Company 25 Global Crossing Limited 27 K-Mart 30 Tyco International, Ltd. 34 WorldCom 37 HealthSouth Corporation 41 CONCLUSION 45 Appendix: SOX Titles and Sections...
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...billion dollars (Bloomberg News). This event was described by the associate director of the SEC's Division of Enforcement, Thomas C. Newkirk, as "possibly one of the most egregious accounting frauds we have ever seen" (SEC). What Thomas Newkirk was describing was a long-standing policy by those at the top of the executive rung at Waste Management to provide their auditors, auditing committee, and the public false and misleading numbers in a variety of ways. The first step in this scandal involved high level executives setting earnings targets without regard to current or recent results. Those executives would then manipulate the numbers in order to match the previously set targets. By doing this, they were attempting to show tremendous growth. With tremendous growth, they could enrich themselves personally as they kept their jobs regardless of the actual results. Also, they reaped the benefits of higher bonuses and increased income as they sold off their personal shares of the company at market prices. This obviously did not reflect the actual company results. This sort of scandal would be similar to owning a baseball team, setting a goal for wins in a season, and then cheating the opposition to assure that your predictions came true. One of the areas where the executives committed their fraud was in depreciation. By...
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...cover the difference, Mr. Neil devised a plan to put the extra cost into the following year which all the company the report better-than-expected results. The alleged fraud gave the company a string of earning beats and a strong rise in its stock. It also allowed Diamond Foods Inc the necessary currency needed to clinch a deal to buy the Pringles snack brand from Proctor and Gamble for $2.35 billion. Everything unraveled after the Wall Street Journal and some skeptical investors questioned the company’s accounting. According the Diamond Foods Inc, they conducted an internal investigation and ultimately restated its finances for the 2010 and 2011 fiscal years. The restated numbers showed the stock price per shared dropped from $90 a share to $13 a share. The fraud also had a negative impact on acquiring the Pringles snack brand. Diamond fired Mendes and Neil in early 2012 and restated its earnings after an internal probe concluded that the accounting was improper. (Hamilton, 2014) On January 9th 2014, the Securities and Exchange Commission charged Diamond Foods and its former SFO in an accounting scheme to falsify walnut costs in order to boost earnings and meet estimates by stock analysts. The SEC also charged Diamond’s former CEO for his role in the company falsifying financial statements that were filed with the SEC. Diamond Foods agreed to pay $5 million to settle the SEC’s charges. Former CEO Michael Mendes also agreed to settle charges against him....
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...Rite- Aid Accounting Fraud: How It Could Have Been Detected Abstract Martin Grass assumed leadership of Rite-Aid from his father in the mid-1990s. In the next 5 years Rite-Aid experienced rapid growth. The company was reporting higher earnings per share each year and a rise in stock prices only to discover it was all because of accounting fraud perpetrated by its senior executives. The SEC filed multiple charges listing the fraud perpetrated by senior management. There were warning signs to investors and creditors that things may not be as good as they seem. Accounting process and techniques could have detected the fraud and prevented Rite-Aid from having the largest financial restatement in history. In 1995 Martin Grass took over as chief executive officer (“CEO”) and chairman of the board of Rite-Aid Pharmacy, which is the third largest pharmacy in the nation. Under Grass, Rite-Aid started to acquire other pharmacy companies such as Perry Drug Stores, Harco Pharmacy and Thrifty Payless. Rite-Aid also purchased PCS Health Systems Inc., which was a pharmaceutical benefits management company. Rite-Aid had a generous compensation program for senior executives that included an annual bonus plan, stock option plan and long term incentive plan (“LTIP”). These programs were based on the company’s earnings per share (“EPS”) and stock price. If the EPS or stock price wasn’t met, then the executives didn’t receive the compensation. It was the company’s compensation program and...
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...Leadership Tactics……………………………………………………….. 7 2.) Corporate Culture at HealthSouth………………………………………………... 8 c.) Following Directions for Failure……………………………………........ 9 d.) Faking corporate profits………………………………………………… 10 C.) The Impact on Stakeholders…………………………………………………………….. 10 3.) Employees and Executives……………………………………………………... 10 e.) Many Lost Jobs as a result……………………………………………… 10 f.) Top Level Management Complacency.………………………………… 11 4.) Investors and HealthSouth Stock……………………………………………….. 11 5.) HealthSouth Patients and Customers….………………………………………... 11 D.) Outcome and Fairness of Punishment…………………………………………………... 12 6.) 2003 SEC Civil Law Suit against HealthSouth………………………………… 12 g.) Charges of Fraud………………………………………………………... 12 h.) Inflated Earnings on Financial Statements ...…………………………... 13 7.) Punishment: Does it fit the crime? ...................................................................... 13 i.) CEO Richard Marin Scrushy’s sentence...……..………………………. 14 j.) Other HealthSouth executives sentence ………………………......... 14-15 E.) Conclusion ………………………………………………………………………….. 15-16 INTRODUCTION There have been many examples of CEO’s misdeeds in recent history but the most interesting of them is former HealthSouth CEO Richard Marin Scrushy. Scrushy was a charismatic leader who could get his employees to follow him...
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...correctly recording the costs on Diamond’s books, Neil told his finance team to record the payments as advances on crops that had not yet been delivered. Even though the payments were for prior crop deliveries, Diamond was able to manipulate walnut costs in its accounting to hit quarterly targets for earnings per share (EPS) and exceed estimates by analysts. (SEC 2014). Carters Inc 2010 Carter’s Inc., the world’s biggest maker of children’s clothing Vice President, Joseph Elles persuaded customers such as Kohl’s to make huge unauthorized purchases of Carters clothing at unauthorized discounts, which were not disclosed. The hidden discounts, caused Carter’s to overstate profits Elles falsely manipulated the dollar amount of discounts that Carter's granted to its largest wholesale customer, to encourage Kohl’s to purchase greater quantities of Carter's clothing for resale. Elles then hid his wrongdoing by persuading the customer to wait to deduct the discounts from payments until future financial reporting periods. He also created and signed false documents to Carter's accounting department the timing and amount of those discounts.(SEC 2010). LocatePlus...
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...Fraud is a serious problem for most businesses today and often technology compounds the problem. In addition, the role of the independent auditor in the detection of fraud is often questioned. (http://www.swlearning.com/accounting/hall/ais_4e/study_notes/ch03.pdf) Fraud is dishonest activity causing actual or potential financial loss to any person or entity including theft of money or other property by employees or persons and where deception is used at the time, immediately before or immediately following the activity. (http://about.curtin.edu.au/definitions-impact.cfm) * Types of Fraud (http://www.auditsol.com.au/media/Fraudw.pdf) 1. Employee fraud Is internal or employee frauds are when fraud is committed against the company or organization a person is working for. Internal frauds can include: * payment fraud Payment fraud is any fraud that involves falsely creating or diverting payments. Payment fraud can include: * creating bogus customer records and bank accounts so that false payments can be generated * intercepting and altering payee details and amounts on cheques and Payable Orders, then attempting to cash them * creating false payment and financial information to support fraudulent claims for benefits * processing false claims by accomplices for benefits, grants or repayments self authorizing payments to oneself. * procurement fraud Procurement fraud is any fraud relating to a company purchasing goods,...
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