“Accounting scandals are political and/or business scandals which arise with the disclosure of financial misdeeds by trusted executives of corporations or governments. Such misdeeds typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of corporate assets or underreporting the existence of liabilities, sometimes with the cooperation of officials in other corporations or affiliates.” This misdeed adversely affects the reputation of the institutions of financial audit, the accounting standards, senior accountants and executives. Because of that the financial and accounting scandals considered of the most serious problems facing communities, because it spreads rapidly and extensively. The governments and the international financial standards are trying to keep everything under control, and to investigate the reasons behind these scandals, so it's not going to repeat again in the future, but with all of these investigations and control it’s still happening. The reasons are still not completed, because some of them happened due to corporate bad governance, and some because of the ethical morals of the CEO’s and CFO’s, and the list is too long. These kinds of scandals usually happened by manipulating or falsification the balance sheet of the company to express a preferable performance to the shareholders. This might include hiding or removing some transactions, unreported costs, fake accounting entries, keeping debts off the balance sheet... etc.. These actions lead the company to bankruptcy and a big financial or accounting scandal afterwards. This paper is going to discuss the “Vivendi Universal Accounting Scandal”. The issue that happened with this co... ... middle of paper ... ...and the liabilities increasing. Some decisions that had been taken by the former CEO made the company about to bankrupt, it seemed to be a small decision but it affects the company dramatically. The result was that Messier prohibited from becoming an officer for ten years and a manager for five years, and his lawsuit to get 21 million Euros for severance package was cancelled, additional to that he paid 1 million dollars for misleading the company and providing false information about the debt of the company. But despite Messier left the company he created, Vivendi still alive (Matlack & Grover, 2002). After the disaster that happened to the company, and the resignation of its CEO Jean-Marie Messier, Vivendi was able to survive again, and to expand. Vivendi also was able to reduce its debts in a short time (Matlack, Grover, & Ihlwan, Vivendi's new vitality, 2005).
By deliberately falsification of their financial statements, by Martin Grass, Brown and Bergonzi. Among other things like:
Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).
Phar-Mor was known as one of the major discount chain retailers in the late 1980’s - early 1990’s. It was founded by Mickey Monus, a gambler in nature, who with the help of senior management was “cooking the books” for years to cover up his loses. The reason why senior management agreed to do this fraud is the belief in unique ability of their leader to fix everything later on. This case is known as one of the biggest accounting frauds in the corporate history of the U.S. This paper will analyze who was affected by this fraud, the motives behind it and what systems of control failed to prevent it.
The law requires auditors to report any fraudulent activities discovered during the course of an audit to the SEC. This is when Article I of Section 51 of the AICPA Code of Professional Conduct comes into play. The auditor may uncover illegal acts or fraud while auditing the financial statements of a company. In such instances, the auditor must determine his or her responsibilities in making the right judgment and report their discovery or suspicions of the said fraudulent activities. Tyco International is an example of the auditors’ failure to uphold their responsibilities. Tyco’s former CEO Dennis Kozlowski and ex-CFO Mark Swartz sold stocks without investors’ approval and misrepresented the company’s financial position to investors to increase its stock prices (Crawford, 2005). The auditors (PricewaterhouseCoopers) helped cover the executives’ acts by not revealing their findings to the authorities as it is believed they must have known about the fraud taking place. Another example would be the Olympus scandal. The Japanese company, which manufactures cameras and medical equipment, used venture capital funds to cover up their losses (Aubin & Uranaka, 2011). Allegedly, thei...
Companies operating in the automotive industry are susceptible to fraud because of the inadequate and inexperienced accounting and financial staff, a large amount of cash kept on hand, and growing revenue as well as sales coming from the highly marketable stocks. The current trend in the industry provides dishonest employees with more opportunities to embezzle funds. Our company has not been exceptional from the payroll problems. Extensive research conducted by the Project team revealed the issues on the Company's current payroll system. · There were cases of dishonest employees’ stealing automotive body parts and inventories to sell for money.
"This is why the market keeps going down every day - investors don't know who to trust," said Brett Trueman, an accounting professor from the University of California-Berkeley's Haas School of Business. As these things come out, it just continues to build up"(CBS MarketWatch, Hancock). The memories of the Frauds at Enron and WorldCom still haunt many investors. There have been many accounting scandals in the United States history. The Enron and the WorldCom accounting fraud affected thousands of people and it caused many changes in the rules and regulation of the corporate world. There are many similarities and differences between the two scandals and many rules and regulations have been created in order to prevent frauds like these. Enron Scandal occurred before WorldCom and despite the devastating affect of the Enron Scandal, new rules and regulations were not created in time to prevent the WorldCom Scandal. Accounting scandals like these has changed the corporate world in many ways and people are more cautious about investing because their faith had been shaken by the devastating effects of these scandals. People lost everything they had and all their life-savings. When looking at the accounting scandals in depth, it is unbelievable how much to the extent the accounting standards were broken.
Enron was in trouble because of something that almost every major corporation during this time was guilty of. They inflated their profits. Things weren't looking good for them at the end of the 2001-year, so they made a common move and they restated their profits for the past four years. If this had worked to their like they could have gotten away with hiding millions of dollars in debt. That completely admitted that they had inflated their profits by hiding debt in confusing partner agreements. Enron could not deal with their debt so they did the only thing that was left to do, they filed for chapter 11 bankruptcy. This went down as one of the largest companies to file for bankruptcy in the history of the United States. In just three months their share price dropped from $95 to below $1.
Giroux, G. (Winter 2008). What went wrong? Accounting fraud and lessons from the recent scandals. Social Research, 75, 4. p.1205 (34). Retrieved June 16, 2011, from Academic OneFile via Gale:
This report deals with the case study on Umicore N.V which is a material technology multinational. The case study talks about the impact of Income Taxes in managerial decision making and financial statement presentation. The case study starts with the company’s profile and tells about what the company is and how it is performing currently. While reading deeper you will learn about the tax depreciation method used by the company, capital gain/loss taxations, cost recovery, deferred tax and Income Tax expense. At the end we have given the conclusion in the perspective of Managers and provided some suggestions to the company.
Accounting ethics has been difficult to control as accountants and auditors must keep in mind the interest of the public while that they remain employed by the company they are auditing. The accountants should take into account how to best apply accounting standards when company faces issues related financial loss. The role of accountant is crucial to society. They serve as financial reporters to owe their primary constraint to public interest. The information provided is critical in aiding managers, investors and others in making crucial economic decisions. An accountant is responsible for any fraudulent financial reporting. Some examples of fraudulent reporting are:
Where is this money being generated from? Why do the boards of directors wish to keep someone who is not creating profit, why should he be allowed to receive any bonuses? Lots of companies fail because of the CEO wasteful spending. Once one person does it everyone in the company will think it is okay to spend any way they want.
Over the 10 years the business was trying to generate new revenue streams to make the company prosperous as it was before. The streams of these revenues had been sustained through illegal dealings on the part of Enron and negotiations they did with other businesses. This scandal demonstrates the need of substantial reforms in corporate governance in the United States, and the ethical situation that should be dealt with in a business.
Enron was on the of the most successful and innovative companies throughout the 1990s. In October of 2001, Enron admitted that its income had been vastly overstated; and its equity value was actually a couple of billion dollars less than was stated on its income statement (The Fall of Enron, 2016). Enron was forced to declare bankruptcy on December 2, 2001. The primary reasons behind the scandal at Enron was the negligence of Enron’s auditing group Arthur Andersen who helped the company to continually perpetrate the fraud (The Fall of Enron, 2016). The Enron collapse had a huge effect on present accounting regulations and rules.
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,
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.