...Sarbanes-Oxley Act of 2002 ACC/561 Sarbanes-Oxley Act of 2002 Following a number of discovered fraud scandals committed by well-known corporations and in order to restore public confidence in the stock market and trading of securities, the United States congress passed the Sarbanes-Oxley Act in the year 2002. As a result of the act endorsement by the New York Stock Exchange and the Securities and Exchange Commission, among many other national overseeing committees, a number of rules and regulations were proposed and adopted and that demanded new processes and programs be instilled for ensuring compliance with the requirements of the new law. The new rules and regulations pertaining to the enacted law have a common goal: 1. Pass accountability and responsibility of the accuracy and truthfulness of financial statements directly to the executives and board members of a company or corporation 2. Increase transparency of corporate accounting and performance record reporting 3. Business reporting ethics to be emphasized with in-place steps and procedures adopted to detect and prevent any type of fraud or manipulation of stakeholders for private benefit. Traditionally, preparation of a company’s financial statements including day-to-day management of the company has been the responsibility of the board of directors and upper management team of the company. The new law clearly rests the responsibility for accuracy and truthfulness of the published financial records on...
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...ROOTS OF A FINANCIAL CRISIS Most companies are currently faced with specific challenges, questions and concerns that are caused by today's uncertain economic environment. In times of market instability, there is an increased potential for management fraud as unexpected losses and financing difficulties create pressure on those who are concerned about the financial performance and solvency of their business. Decisions made in the past due to financial crises are constantly being reconsidered and old certainties questioned. Accounting has been evolving with the development of advancements and setbacks of society. The SEC has to constantly reevaluate their accounting policies due to past events and changes from various economic and financial crises. The complexities and debates that arise from the causes of a financial crisis result in revisions to accounting regulations and standards that seem to be quickly implemented in order to prevent future disasters. THE SECURITIES ACTS OF 1933 AND 1934 The Securities Act was Congress' opening shot in the war on securities fraud with Congress primarily targeting the issuers of securities. Companies which issue securities (issuers) seek to raise money to fund new projects or investments or to expand; thus, companies have an incentive to present the company and its plans in the rosiest light possible. The Securities Act serves the dual purpose of ensuring that issuers selling securities to the public disclose material information to investors...
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...Escala Group, Inc., Gregory Manning was charged, along with former CFO Larry Lee Crawford, with disclosure and accounting fraud violations concerning related party transactions between Escala and its parent company, Afinsa Bienes Tangibles, S.A. ("Afinsa"). Escala, now known as Spectrum Group International, Inc., was a network of companies in the collectibles market specializing in stamps. Afinsa was a privately held Spanish company that sold investments in portfolios of stamps in Europe. The Commission's complaint, filed on March 23, 2009, and amended on August 28, 2009, among other things, alleged a fraudulent business scheme based upon the secret and dramatic manipulation of collectible stamp values, in which Manning violated the antifraud and reporting provisions of the federal securities laws by failing to disclose the related party status of Barrett & Worthen, Inc., resulting in control of the Brookman Catalogue, and failing to disclose the revenues obtained by virtue of Afinsa and Manning's...
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...At a time of high federal budget deficits and unsustainable growth in health care costs, there is general agreement on the need to eliminate unnecessary spending in health care--and among the leading candidates are fraud and abuse. Despite ongoing, concerted efforts, making meaningful inroads has not been easy."Fraud" refers to illegal activities in which someone gets something of value without having to pay for it or earn it, such as kickbacks or billing for services that were not provided. "Abuse" occurs when a provider or supplier bends rules or doesn't follow good medical practices, resulting in unnecessary costs or improper payments. Examples include the over-use of services or the providing of unnecessary tests. (Another area, "waste," refers to health care that is not effective, and will be the subject of a separate Health Policy Brief.)Endowed with new powers under the Affordable Care Act and the Small Business Jobs Act of 2010, the Centers for Medicare and Medicaid Services (CMS) has been adopting new tools to curb fraud and abuse in the Medicare and Medicaid programs. The new approach amounts to a paradigm shift from the earlier model, in which CMS paid providers first, then sought to chase down fraud and abuse after the fact--a process known as "pay and chase."This policy brief focuses on eliminating fraud and abuse in Medicare and Medicaid and explores the challenges involved in putting the new tools into place. | What's the background? | The true annual cost of...
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...created to get rid of outlawed manipulative and abusive practices in the issuance of securities, required registration of stock exchanges, brokers, dealers, and listed securities, and required disclosure of certain financial information and insider trading. Based on this information, his brother is correct to not agree with him and the stocks should be registered. There are several rules and regulations promulgated under the Securities Act of 1933. The exemption for Offers and Sales of Securities Pursuant to Certain Compensatory Benefit Plans and Contracts Relating to Compensation 1. This section relates to transactions exempted from the registration requirements of section 5 of the Act. These transactions are not exempt from the antifraud, civil liability, or other provisions of the federal securities laws. Issuers and persons acting on their behalf have an obligation to provide investors with disclosure adequate to satisfy...
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...identify 4 types of solicitations of employment involving IRS matters that a CPA is allowed to make. d) According to Circular 230, which type of statements may not be used when a CPA advertises? e) From Study Unit 1 identify 3 requirements a practitioner must comply when providing a covered opinion. f) Identify the “best practices” tax advisors should adhere to in providing advice and in preparing a submission to the IRS. 100 word minimum 5) a) From Study Unit 2 indicate what Rules 505 and 506 required for an offering to be exempt under Regulation D of the Securities Act of 1933. b) What form must be filed with the Securities and Exchange Commission (SEC) by non-reporting and unseasoned issuers? c) Who is prohibited by the SEC's antifraud Rule 10b-5 from trading on the basis of inside information of a business corporation's stock? d) Within what period of time, under the Securities Exchange Act of 1934, do short-swing profits arise from the sale and purchase (purchase and sale) of the issuer's stock? 100 word...
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...There are numerous threats to auditor independence. Derived from Porter, Et Al (2014) - Firstly, Self-interest threat which are dangers that emerge from auditors acting to their own interest. Auditors may support, intentionally or intuitively, those self-intrigues over their enthusiasm for performing a quality review. The auditors’ relationship with bluebird limited creates a financial self-interest because they pay the auditors’ fees. Auditors also have a financial self-interest if they own stock in an auditee; as I have just inherited a 3% shareholding in bluebird, the quality of the audit may be lacking as a financial self interest may be obtained by me, for example excluding some pieces of vital information from the audit to serve my own financial interests. Another kind of threat, known as Self-review may be brought about. These are threats that emerge from inspectors inspecting their own particular work or the work done by others in their firm. It might be harder to assess without predisposition one's own particular work, or that of one's firm, than the work of another person or of some other firm. As the auditor has a 3% shareholding in bluebird, a self-review threat may arise if I was to review judgements and decisions I, or others within the firm, have made. Familiarity (or trust) threats are threats that emerge from auditors being impacted by a close association with an auditee. Such a risk is available when auditors are not adequately suspicious of an auditee's...
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...used to refer to the use of non-public information to trade in securities (in some cases the person who leaks the information isn't really an “insider”), or the communication of non-public information to others. So what is an insider to me? Although I could not find a specific definition, I understood that the law prohibits: * Trading by an insider, while in possession of material non-public information * Trading by a non-insider while in possession of non-public information, where the information either was disclosed to the non-insider in violation of an insider’s duty to keep it confidential or was misappropriated * Communicating material non-public information to others in breach of a fiduciary duty. SEC Rule 10b-5 is an antifraud provision that covers anyone having inside information. In the example above,...
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...rose from 1.47 per share to 32.00 per share, when merged with Afinsa. Both companies were able to get these results by committing fraudulent acts which included the manipulation of collectable stamp values and their appraisals. Escala and Afinsa failed to disclose their involvement with Barrett & Warren, a small publishing company in which they initially gained control of the stamp collection. Escala was guilty of selling Afinsa’s investors the stamps at arm’s length prices. Escala also was guilty of selling back inventory to Afinsa which is considered a round trip transaction. They were also guilty of falsely reporting a payment for business combination related expense as the sale of certain antiques. Escala violated the antifraud and reporting provisions of the federal securities law according the SEC complaints. The SEC charged Escala with accounting and disclosure fraud concerning related party transactions with its parent company. They were also charged with violations’ of the Exchange Act. Afinsa was charged with aiding and abetting Escala’s violations. Nine executives and owners of Afinsa were arrested by the anti-corruption prosecutor. It seems that this was one of the biggest ponzi schemes ever reported and it was going on...
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...t | | |Health Care Fraud and Abuse | | | | | |Tannisia Brown | |6/17/2012 | | | Health care fraud is the filing of dishonest health care claims to obtain a profit and is considered a white collar crime. Health care abuse is when someone overuses or misuse services. Both, Health care fraud and abuse, in the United States is an ongoing issue and is costing the United States government billions of dollars. Every time a fraudulent act is perpetrated the insurance company passes the cost to its customers. Due to the high volume of health care...
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...Career Opportunities in Accounting Christopher Trahan Accounting 100 Michael Kapral December 10, 2014 “Accounting consists of three basics activities, it identifies, records, and communicates the economics events of an organization to interested users.” (Weygandt, 2013, p. 4). The primary function of accounting is to record business transactions and provide financial reports for a variety of different business processes. There are many duties that fall under the accounting umbrella and many different career options available if accounting is the chosen field. Public accountants is one of the broadest fields that provide accounting, tax auditing and consulting services to a government corporation, nonprofits, and individuals. Many public accountants are Certified Public Accountants (CPA). They handle a broad range of duties from filling taxes for individuals and corporations in financial planning services. CPA duties are regulated under the American Institute of Certified Public Accountants (AICPA). “AICPA sets ethical standards for the profession and U.S. auditing standards for audits of private companies, non-profit organizations, federal, state and local governments.”(2014, November 30). They perform financial planning services for either an individual or a corporation, assist clients with a number of financial functions, including public accounting, assessment management, and tax planning services, risk assessment and management, financial compliance and performing...
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...GOVERNMENTAL STANDARD SEniNG IN PERSPECTIVE The author examines the need tor a single body to set rules. by Michael H. Granof The problems of financial reporting by governmental units are unique and as a consequence the models for standards are not necessarily comparable nor can parallels always be drawn between governmental and corporate reporting. This article examines the differences between user requirements and explores the necessity for standard setting by a single body. First of ali, the sources from which investors derive information regarding securities of municipalities appear to be different from those of other types of organizations. Although there have been few research efforts to identify the factors which influence investor decisions to buy or sell specific municipal issues, it is believed that the bond rating assigned by Moody's or Standard & Poor's is the single most significant element. Available statistical evidence indicates a close correlation between the rating assigned to a bond and the price at which it is sold in the market. An improvement of one grade on the rating scale has been associated with a reduction in interest rate from 28 to 40 basis points (hundredths of a percent in interest rate).' Moreover, government securities are 1 Derived from tables in John E. Petersen, The Rating Game (New York: Twentieth Cenlury Fund, 1974), p.44. MICHAEL H. GRANOF, CPA. PhD., is associate professor of accounting at the University of Texas at Austin. He is currently...
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...would have handled the situation the same way as Ms. DenDanto. However, upon my resignation I would have sent the memo. It would be a tough decision to give up my livelihood, but I could not have survived in such a toxic work environment. The Sunbeam board of directors fired Al Dunlap and Russell Kersh in June of 1998. Al Dunlap, Russel Kersh, and other Sunbeam executives were sued by the Sunbeam shareholders and settled the lawsuit for $15 million in 2002. Al Dunlap, Russell Kersh, and other Sunbeam executive as well as Phillip E. Harlow, a partner at Arthur Andersen, were also sued by the Securities and Exchange Commission (SEC) in 2001. The SEC permanently prevented from Al Dunlap and Russell Kersh from failing to comply with the antifraud and other internal controls provisions of the federal securities laws; permanently banned them from performing duties as officers or directors for public companies; and Al Dunlap was forced to pay a $500,000 civil penalty, and Russell Kersh was forced to pay a $200,000 civil penalty. The Sunbeam board of directors fired Arthur Andersen in December of 1998. Arthur Anderson was sued by the Sunbeam shareholders and settled the lawsuit for $110 million in 2001. As indicated in question 8-3 above, the SEC named Phillip E. Harlow, a partner at Arthur Andersen, in its lawsuit against Al Dunlap, Russel Kersh, and other Sunbeam executives. In 2013, the SEC ordered that Phillip E. Harlow no longer be allowed to appear before the SEC but could...
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...of joint ventures through fraudulent side letters, and other accounting errors and irregularities, Ahold's original SEC filings for at least fiscal years 2000 through 2002 were materially false and misleading. For fiscal years 2000 through 2002, Ahold overstated net sales by approximately EUR 33 billion ($30 billion). For fiscal years 2000 and 2001 and the first three quarters of 2002, Ahold overstated operating income by approximately EUR 3.6 billion ($3.3 billion) and net income by approximately EUR 900 million ($829 million). Ahold has agreed to settle the Commission's action, without admitting or denying the allegations in the complaint, by consenting to the entry of a judgment permanently enjoining the company from violating the antifraud and other provisions of the securities laws. The charges against the individuals, all foreign nationals, are based solely on their roles in the improper consolidation of joint ventures. Van der Hoeven and Meurs have...
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...always black and white. As a CPA, Davenport knew what ethical course to take and took it. The audit committee chairman and the CEO considered what was in the best interests of the company and made their choice, opting to let Murphy off the hook. Only time will tell whether they made the right decision: Will Murphy mend his ways? Will other employees find out he got away with theft and try it themselves? Second, there is a double standard in most organizations for employees and for executives. Dismissing a clerical employee for expense account abuse might be done with little thought, but companies naturally are reluctant to get rid of a big revenue-producing executive like Murphy. The result, of course, is that it may send the worst kind of antifraud message: “In this company, crime pays.” WHAT COMPANIES SHOULD KNOW ABOUT Expense account schemes. Employees who cheat on their expense accounts usually do so by one of four methods: Mischaracterized expenses. Employees produce legitimate documentation for nonbusiness-related transactions. Example: taking a friend to dinner and charging it to the company as “business development.” Overstated expense reports. Employees inflate the amount of actual expenses and keep the difference. Example: altering a taxicab receipt from $10 to $40. Fictitious expenses. Employees submit phony documentation for reimbursement. Example: producing a fake hotel bill on a home computer. Multiple reimbursements. Employees copy invoices and resubmit them for payment...
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