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Phar-Mor Case

In: Business and Management

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Assignment Week 1
The Case of Phar-Mor Inc
Devry University
ACCT 525-15768

January 12, 2014

Abstract
The Sarbanes-Oxley Act of 2002 was implemented with the sole purpose of assuring the investors in the financial reporting system. One example is a case such as Phar-Mor which fabricated their inventory in most of their retail stores in order to conceal a massive fraud by the leading executives. Or the Waste Management scandal which did things such as capitalizing items which should have been left on the income statement in order to increase their assets. Lastly, Enron, which had such an elaborate scheme in place that it was hard to decipher and was only uncovered when the CEO stepped down. It is not to say that SOX could have prevented these scandals but instead it helped create this act that will help set place 11 laws or sections to help deter such elaborate frauds in future leading companies.

Week 1 Assignment-The Case of Phar-Mor Inc
The Phar-Mor accounting scandal of $500 million was a massive fraud conducted by upper management which ultimately led to its bankruptcy in 1992. President Michael Monus, chief financial officer Patrick Finn, vice president of finance Jeffrey Walley, controller Stanley Charelstein, and accounting manager John Anderson were all convicted of financial statement fraud. As a result of this fraud charges were also filed against Phar-Mor’s independence audit company, Coopers & Lybrand LLP (Coopers). It is in direct response to accounting scandals such as this that The Sarbanes-Oxley Act of 2002 (SOX) was drafted. SOX was created in large to increase investor’s security and confidence in the market due to high profile accounting scandal cases such as Phar-Mor, WorldCom, Enron and other large entities. Senator Paul Sarbanes and Representative Michael Oxley drafted a bill which contained 11 sections of laws that future...

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