Background
In July 1996, Alert J.Dunlap (also known as Chainsaw Al)was hired as CEO and Chairman by Sunbeams' board of directors to help the company from a period of lagging sales and profits and make it an attractive acquisition target.
Dunlap used cost-cutting style method and had a reputation for results that immediately the price of Sunbeam stock price increased by 60 percent.
How things begin?
In 1997, Dunlap fired thousands of employees, shut down factories and warehouses, and streamlined the company by eliminating products and selling businesses unrelated to its core products. He attained his objective and made profit for shareholders. However, the wealth did not last. In April 1998, Sunbeam announced a first-quarter loss, and stock prices fell by 25 percent. Dunlap discovered his reputation and cuts were not going to maintain the high stock prices or profits at Sunbeam. So, he used manipulative accounting. He transferred sales from future quarters to the current one by using a “bill and hold” strategy, which involves selling products to retailers for large discounts and holding them in third-party warehouses to be delivered at a later date. Sunbeam wanted to report higher revenues in the form of accounts receivable by booking sales months prior to the actual shipment or billing. The strategy helped Dunlap increase Sunbeam’s revenues by 18% in 1997. In 1998, second-quarter sales were considerably below Dunlap’s forecasted increase and, in fact, the company was in crisis with projections of a US$60 million loss for the quarter.
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...
... middle of paper ...
...es Act.
Works Cited
1. Brooks, L., Dunn, P. (2012) Business & Professional Ethics for Directors, Executives & Accountants. 6th Edition. Thompson South-West.
2. What is the Role of Auditors? | Suite101
http://suite101.com/a/what-is-the-role-of-auditors-a347335
3. Five Ways to Shape Ethical Decisions: Common Good Approach, Retrieved October 31, 2013, from
http://www.capsim.com/blog/2012/five-ways-to-shape-ethical-decisions-common-good-approach.cfm
4. What Are Basic Business Ethics Theories?, Retrieved October 31, 2013,
http://www.wisegeek.com/what-are-basic-business-ethics-theories.htm
5. Sunbeam Corporation, Retrieved October 31, 2013,
http://www.auburn.edu/~stanwsd/sunbeam.html
6. Ferrell-2e_02 - ferrell_sampleCH02.pdf , Retrieved October 31, 2013,
http://highered.mcgraw-hill.com/sites/dl/free/0070921989/226745/ferrell_sampleCH02.pdf
Brooks, L.J. (2007) Business & Professional Ethics for Directors, Executives & Accountants. Mason, OH: Thomson South-Western.
Cohen, S., Grace, D. (2010). Business ethics: Canadian edition. Don Mills, Ontario: Oxford University Press.
Romal, Jane B., and Hibschweiler, Arlene M. "Improving Professionals Ethics: Steps for Implementing Change." The CPA Journal (2004). Retrieved on 16 September 2006 .
Trevino, L. K., & Nelson, K. A. (2011). Managing business ethics: Straight talk about how to do it right. New York: John Wiley.
...ncial situation of the company in the board meeting. Hence, board made the right decision in firing Albert Dunlap as the CEO of Sunbeam.
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.
So first , he had to conceal financial problems. He created ,,cookie jar ‘’ reserves and they were used to make the company look as if it was experiencing a rapid turnaround. Initially, they increased the losses of Sunbeam in 1996, so that it can later be reversed to inflate profit in 1997. Dunlap made the company recognize revenues for sales that did not meet applicable rules of accounting. As a result of this, at least 60 million dollars of sunbeams record-setting 190 million dollars reported earnings in 1997 was deemed to be due to fraudulent acts. He also caused Sunbeam to engage in the acceleration of sales revenue from a later period and deleted certain corporate records to conceal pending returns of merchandise. Another thing that sunbeam did was they recorded some sales that were not real, through a variety of methods, and recorded other sales that came from ''channel stuffing,'' putting inventory onto the books of distributors and retailers. In one case, electric blankets that had been packaged for a certain retailer were sent to a distributor who agreed, in return for a guaranteed profit, to hold the blankets until the retailer was ready to accept them. Other sales were made by offering deep discounts to persuade customers to buy merchandise that they would not need for many months. According to the rules of accounting the company should have disclosed those discounts and the sales should have been recorded in later
...urvey of ethical behavior in the accounting profession. Journal of Accounting Research, 9 (2), pp. 287-306.
Brooks, Leonard J. Business & Professional Ethics for Directors, Executives, & Accountants. Mason: Thompson South-Western, 2004. p227.
In the early 1900’s the economy was changing, and the automobile industry was booming. Sears, Roebuck began as a small mail order company, and later transformed into a nationwide chain of retail department and specialty stores, which included appliances and auto service centers (Emmit, Jueck and Rosenwald, 1951). In the late 1980’s Sears began to see a drop in revenue due to similar market retailers setting up shop nationwide. This created a number of hardships for Sears. On June 11, 1992 The California Department of Consumer Affairs charged seventy-two of Sears, Roebuck’s auto repair centers with defrauding customers by performing unnecessary service and repairs (Fisher, 1992). The Department’s Automotive Repair division charged Sears repair centers with fraud, false advertising, failure to clearly state parts and labor on invoices along with making false and misleading statements a (Fisher, 1992). This case is unique because, it was the first time The Consumer Department of Affairs had targeted the statewide operations of a company (Gellene, 1992). This paper will discuss the events that led up to over forty states seeking the revocation of licenses held by Sears auto centers, along with the types of fraud committed.
Seawell, Buie 2010, ‘The Content and Practice of Business Ethics’, Good Business, pp. 2-18, viewed 22 October 2013, .
Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2013). Business ethics: Ethical decision making and cases: 2011 custom edition (9th ed.). Mason, OH: South-Western Cengage Learning.
The Strategic Analysis will show some of the steps that have been taken to overcome some of the difficulties that Sears has had. The newest CEO, Arthur C. Martinez, has been a motivating leader for the company. He has implemented many changes that have increased sales and moved Sears back up to the top of the retail chain. These changes would include store remodeling, Internet strategies, differentiation, and human resource management.
Treviño, L. K., & Nelson, K. A. (2007). Managing business ethics: Straight talk about how to do it right Fourth ed., Retrieved on July 30, 2010 from www.ecampus.phoenix.edu
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.