Sunbeam committed the following two fraud schemes while Al Dunlap was the company’s Chief Executive Officer (CEO): (1) Improper Timing of Revenue Recognition via Bill Hold Sales, Consignment Sales, and Other Contingency Sales and (2) Overstating Earnings via Improper Use of Restructuring Reserves. A series of detection methods were utilized in each fraud scheme to determine the indicators that proved that Sunbeam was involved in manipulating its financial data. The most utilized method for detecting Sunbeam’s fraud was Financial Statement Analysis. Utilization of Annual Reports and Disclosures were utilized just as much as Corporate Research and Media while Business Plan Analysis was ranked as being the fourth most used. Finally; leadership …show more content…
An effective leader is someone who possesses strong moral character, management skills, and a good track record. Al Dunlap handled Sunbeam's turnaround quite similarly to Scott's Paper by cutting costs through eliminating and selling off a number of corporate divisions. Scott Paper was sold to Kimberly-Clark, but success did not last long. Kimberly-Clark had to report a $1.4 billion restructuring charge while Dunlap made out like a bandit. He used intimidation and wealth to motivate employees to follow his lead. Dunlap’s business plan was to increase sales growth by implementing various cost-cutting strategies. Eliminating jobs, research & development, and production ended up hurting Sunbeam more than helping it. During Dunlap’s first days as Sunbeam’s CEO, he implemented a restructuring reserve that arouse suspicion regarding early expense recognition. There was no way that Dunlap’s elaborate down-sizing plan would create sales growth despite the 1997 financial statements. Upon reviewing Dunlap's track record at Scott's Paper as CEO and his overall character, he was not fit to be Sunbeam's CEO even though Sunbeam executives thought he was perfect for the job. With a CEO like “Chainsaw Al” Dunlap, fraud will definitely
Madura, Jeff. What Every Investor Needs to Know About Accounting Fraud. New York: McGraw-Hill, 2004. 1-156
The term “fraud” is commonly used to describe the use of deception to deprive, disadvantage or cause loss to another person or party. This can include theft, the misuse of funds or other resources, or more complicated crimes such as false accounting and the supply of false information. This case study of Mountain State Sporting Goods is an excellent example of individuals acting on the opportunity to financial benefit by committing what they thought was harmless adjustments, but in reality was fraud. In this case study there are is just so much wrong with this company and how it operates. We noticed multiple areas of concern before even seeing the financial statements and my concerns were confirmed upon further investigation.
The SEC determined that Sunbeam filed quarterly and annual reports that had false financial statements and failed to make required disclosure. Subsequently the SEC findings went on to state “Sunbeam's books and records were manifestly inaccurate on so many items and over such an extended period of time as to indicate complete failure of internal controls in violation of Sections 13(b)(2)(A) and 13(b)(2)(B).” (U.S. Securities and Exchange Commission,
Financial Shenanigans was written by Howard Schilit. The main objective of the book is to show ways companies can alter their financial accounting reports to reflect a much attractive appearance of their company’s health and growth when indeed that company is running into severe trouble. There are different ways the company can accomplish this and the author gives us “Seven Shenanigans” that companies can change the investor’s point of view towards the performance of the company. Basically, he breaks up each chapter to the particular shenanigan and discusses different techniques for achieving each shenanigan. For example, the author used Priceline.com, Cendant/CUC, AOL, and Xerox to illustrate each shenanigan. Chapter 11 and 12 of the book discusses the analyzing of financial reports and how to use financial databases to discover warning signs. Then there is another chapter on finding shenanigans in the company’s annual 10K report and how to find hints for financial shenanigans.
Sunbeam is an American home appliances maker all the way from 1910. Over their long years of operating, they have created some of the best most widely used products in the market such as electric iron and a pop-up toaster. Even though the company was well known, it was no secret that it has been running into financial problems. So it was decided to fix it. In July 1996, they hired a new CEO and a chairman of board , Albert Dunlap. He was Nicknamed Albert ,, Chainsaw’’ Dunlap because of his ruthlessness in the business field and willingness to do whatever it takes. He was best known as a turnaround specialist and professional downsizer but his reputation was ruined after he engineered a massive accounting scandal at Sunbeam corporation and
In modern day business, there can be so many pressures that can cause managers to commit fraud, even though it often starts as just a little bit at first, but will spiral out of control with time. In the case of WorldCom, there were several pressures that led executives and managers to “cook the books.” Much of WorldCom’s initial growth and success was due to acquisitions. Over time, WorldCom discovered that there were no more opportunities for growth through acquisitions when the U.S. Department of Justice disallowed the acquisition of Sprint.
Sears Holdings is a company in transition. Now, faced with adversity and the threat of bankruptcy looming its leadership has come under scrutiny. “Great leaders not only have drive; they want to lead. Also important is a high need for power, a preference to be in leadership rather than follower positions. A high power need induces people to attempt to influence others, and sustains interest and satisfaction in the process of leadership. When the power need is exercised in moral and socially constructive ways, rather than to the detriment of others, leaders inspire more trust, respect, and commitment to their vision (Bateman, pp 399, 2007).”
Dunlap had used manipulative accounting techniques to report a profitable of Sunbeam’s financial result. According to SEC Finding, the manipulative accounting techniques are used as following...
Suddenly, some companies become extremely successful, while rest of them unfortunately remains a failure. There can be off-course a lot of reasons for this failure but one of the main reasons is lack of leadership qualities. There are many s...
Taking a look at Donald Cressey’s hypotheses which is now known as the fraud triangle depicts the certain criteria for the mind frame of the fraudster. The fraud triangle is a theory that consists of perceived pressures, perceived opportunity, and rationalization. It gives us the different pressures placed on individuals that would make them consider “cooking the books.” It also demonstrates where the possible opportunity lies so that we may take precautions to eliminate the opportunity. Last, it demonstrates how a fraudster rationalizes with themselves to make committing the fraud okay. Donald Cressey believes all three elements must be present for fraud to occur. Upper management is usually the focus of financial statement fraud because financial statements are done at the management level. So in this case financial statement fraud was committed by the CEO Gregory Podlucky
In many circumstances, employees’ behaviors are likely to follow their leader. Enron’s leadership has been extremely influential due to exemplified charismatic. For example, Heffrey Skilling and Kenneth Lay, CFO and one of executive member in Enron, greatly encourage employees to follow their lead. Their incompetence accounting profession directly affects lover level of employees. Eventually, those manipulating accounting activities affect company collapse. Once leadership has done unethical professional accounting behaviors, unethical acts become accepted. Employees have many reasons for remaining quiet. While Enron still have ethical internal rules, when leadership in Enron did not abide and did not provide corresponding example of employees to follow (Prentice 2003, p. 417). Which eventually make Enron’s become one of the largest corporate scandal frauds.
Dowd (2016) runs above and beyond with the clarification to state accounting fraud incorporates the change of accounting records in regards to sales, incomes, costs and different components for a profit motive, for example, boosting organization stock prices, getting ideal financing or maintaining a strategic distance from obligation commitments. Dowd is of the feeling that covetousness, absence of straightforwardness, poor administration data and poor accounting interior controls are a couple of explanations behind accounting fraud. (Dowd,
People always talk about how important it is for companies to have a good leader, someone who not only keeps the blue numbers, but also achieves a loyalty from customers, pleasant working environment, successful business partnerships and ahead of the competition.
The Tyco accounting scandal is an ideal illustration of how individuals who hold key positions in an organization are able to manipulate accounting practices and financial reports for personal gain. The few key individuals involved in the Tyco Scandal (CEO Kozlowski and CFO Swartz), used a number of clever and unique tactics in order to accomplish what they did; including spring loading, manipulating their ‘key-employee loan’ program, and multiple ‘hush money’ payouts.
It is difficult to be an excellent leader of an organization nowadays. There are many challenges faced by a leader and they need to have specific leadership skill to solve the problems. Sunway Group had faced several challenges and its leader Jeffrey Cheah success to solve the problems and lead the company to a success phases.