On September 22, 2015 U.S. Securities and Exchange Commission (SEC) charged Stein Mart Inc. “…for materially misstating its pre-tax income due to improper valuation of inventory subject to price discounts and for having inadequate internal accounting controls.” (Press Release). Stein Mart Inc. is a national retail chain store based in Jacksonville, Florida. Stein Mart, like many retailers, reduce prices of merchandise for periodic sales or for quick inventory turnover, but Stein Mart failed to properly record the reduced merchandise in which lead to an investigation by the SEC. Material misstatements in their financial statements and weaknesses in their internal controls were found. Stein Mart classifies certain reduced prices as Perm POS …show more content…
For example, if Stein Mart continued to show 30 percent more pre-tax income than they actually have then they are deceiving investors who use the financial statements that are published each quarter or year. This false information could drive investors into making decisions, ones that are crucial to an investors success, that they would not normally make had the financial statements been presented accurately (The Role of the …show more content…
Internal controls play an important role in a company (Internal Control). A company can fail or succeed based upon their quality of internal controls. Stein Mart had low quality internal controls. As an example, “…Stein Mart’s chief financial officer, who was hired in 2009, did not learn of Stein Mart’s treatment of Perm POS markdowns until the summer of 2011.” (Press Release). One component of the COSO framework of internal control is information and communication (Internal Control). The merchandising department made the decision to perform the markdowns in the manner they did without any approval from any other department. This is a weakness in the company because multiple departments, specifically the accounting department, should have been involved in the decision (Press Release). The accounting department in an ideal situation would have been against the proposed method of markdowns because their knowledge of the consequences from performing or recording a markdown in an inappropriate manner (Press Release). Since timeliness is critical the new CFO should have become informed about the matter of markdowns much sooner. Had the internal controls of Stein Mart been more aligned with the COSO framework then the chance of such misstatement would have been less likely to have
Even though internal controls do not always work, every entity that has workers should have internal controls. Internal controls protect entities from dishonest workers. Internal controls are a series of checks and balances. The Sarbanes-Oxley Act of 2002 was needed to gain control of accounting improprieties. Dishonest accounting has cost company employees millions of dollars in retirement funds. It has also cost investors millions of dollars.
As what it came to be as one of the notorious case of fraud in the mid-1980s; the electronic store well known as (Crazy Eddie), its owner Eddie Antar and CFO Sam Antar committed every possible act fraud there is. Just to mention two of which they perpetrated; tax evasion and securities fraud. Basically, the tax evasion was committed for many years, it was not until the company became public in 1984 that their wrong doing near its end. Once Crazy Eddie went public, a new set of rules took place, such as compliance with the Securities Exchange Commission and the scrutiny of its investors. Soon, they both realized that their long committed fraud was nearing its end, when an external audit found the real numbers on the company’s inventory, revenues,
“We’d all heard Nordstrom was the place to work” (Weston, Simons, 1999 p.1) said Patty Bemis, who had worked as a Nordstrom sales clerk for 8 years. Throughout 1980’s, Nordstrom sales clerks, or “Nordies” as they called themselves, were leading the industry in quality and productivity. Nordies earned a competitive annual pay of $20,000 to $24,000 compared to the national average of $12,000. Despite offering high salaries to its employees, Nordstrom became target to a storm of employee complaints, union allegations, lawsuits, and regulatory orders in 1989 (Weston, Simons, 1999 p.8). As a result, Nordstrom’s reputation and financial performance suffered tremendously. Where exactly did Nordstrom go wrong?
Since January 31, 2004, the investment banker for Wal-Mart has been Moody's investor services. Wal-Mart plans to refinance for their long term dept with Mood's Investor Services and also a few other investment banking for other corporate purposes that are not mentioned. Wal-Mart also plans to bowwow 3.3 billion dollars and an additional 1.1 billion for commercial paper By January 31, 2004 the, Wal-Mart had already established a 5.1 billion dollar lines of credits from 77 different banking industries and investment and used up approximately 145 million in the production of commercial paper. During the same time period Wal-Mart had 6 billion dollar debt of securities under a shelf registration regulation which derived from the SEC. Wal-Mart sold 1.25 billion in notes and maturity. The notes bear an interest of 4.1.25 % and mature by February 2011. The total quantity of notes allowed to be sold to is up to 4 billion.
... illustrated by the 4% growth rate, need to underscore the urgency for Loblaw to aggressively contain the more industry-wide problems of rapidly expanding packaging costs and the need for making their supply chain more efficient. This latter weakness of the entire Canadian marketplace is one that Wal-Mart will target with their initial launch into the market. There is also the threat of consolidation throughout the industry, and while Loblaw has capitalized on this with a series of successful acquisitions reslting in the addition of over 200 stores distributed throughout Canada and the U.S. To this point Loblaw has been successful in capitalizing on consolidation, yet this is a persistent threat. In addition to all these other factors, the continuing increase in the price of oil has continued to drive up the costs of operating all distribution channels and operations
Wal-Mart's history is one of innovation, leadership and success. It started with a single store in Rogers, Arkansas in 1962 and has grown to what is now the world's largest - and arguably, the most emulated - retailer. Some researchers refer to Wal-Mart as the industry trendsetter. Today, this retailing pioneer has annual revenues of over $100 billion, 3,000 stores and more than 750,000 employees worldwide. Wal-Mart operates each store, from the products it stocks, to the front-end equipment that helps speed checkout, with the same philosophy: provide everyday low prices and superior customer service. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Wal-Mart has invested heavily in its unique cross-docking inventory system. Cross docking has enabled Wal-Mart to achieve economies of scale which reduce its costs of sales. With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. This allows Wal-Mart to replenish the shelves 4 times faster than its competition. Wal-Mart’s ability to replenish theirs shelves four times faster than its competition is just another advantage they have over competition. Wal-Mart leverages its buying power through purchasing in bulks and distributing the goods on it’s own. Wal-Mart guarantees everyday low prices and considers them the one stop shop.
What core competencies do you think the company has and what is needed to exploit opportunity and counter threats.
A1: Dollar General's main business strategy is to focus on being the leading distributors of consumable basics, with 30% of the merchandise at $1.00 or less. Dollar General believes in maintaining an assortment of consumable merchandise and making shopping for everyday items hassle free and simplistic.
Wall Street's demand for high growth motivated Peregrine Systems' executives, to fraudulently inflate revenues and stock prices. According to the SEC, "Peregrine filed materially incorrect financial statements with the commission for 11 consecutive quarters." Steven Spitzer, a member of Peregrine's sales team admitted to meeting regularly with senior management near the end of the quarter to determine how much revenue was needed to exceed Wall Street's expectations. The primary fraud committed by Peregrine was done by inflating revenue by booking revenue when sales never occurred. By recognizing revenue from sales that never occurred, the accounts receivable balance and net income were fraudulently overstated; the accounts receivable would never be collected, because the merchandise was never sold. To cover up their high, outstanding, accounts receivable balance as a result of booking sales that did not occur, Peregrine fraudulently engaged in financial agreements with banks.
Walmart has thin profit margins, which leads them to cut costs, as much as possible. Thin margins are an effect that is caused by using the cost leadership strategy. Since Walmart prices are so low, they must reduce their operating costs. They can do this by lowering their workers hours, developing new technology to speed up efficiency in stores, and by lowering worker accidents and liabilities. In turn, however, this may also cause more employee and customer accidents because, with cutting costs, comes more risk. While stores are trying to cut costs, the inventory side of the business can be problematic.
The last dimension discussed is the environment. The scores for environment are quite close and even exceed that of other sustainable businesses. Jury (2015) indicated that Michaels Stores Inc. is an arts and crafts store, most of their products are made from paper and there might be other products that contain substances that will be harmful to the people if not properly disposed. Therefore there is a facility where products from paper and cardboard are disposed of properly. Also there is a company that comes in to take away harmful chemicals and dispose of them accordingly.
"Wal-Mart: The High Cost of Low Prices." Top Documentary Films. Web. 8 Aug 2011. .
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,
A firm 's competitive advantage is achieved through offering customers a greater value, either by way of lower prices or by providing greater benefits and service that justifies a higher price. Nordstrom strengthens its competitive advantage and generic strategy through cost leadership and differentiation in order to differentiate themselves from other high end retailers. Nordstrom has consistently maintained a unique reputation from their establishment in 1901 to the today. Since developing a strong competitive advantage from inception, Nordstrom has been able to adapt to changing environments and market conditions to maintain their success. Nordstrom has set the bench mark in the retail sector through customer service and product quality.
In today’s day and age, there is a lot of news that is related to corporate accounting fraud as companies intentionally manipulate their financial statements to show a better picture of their financial health. The objective of financial reporting is to provide financial information about a company to its various stakeholders such as investors and creditors so that these stakeholders can make decisions accordingly. Companies can show a better image of their financial well being by providing misleading information. This can be done by omitting material information from the books or deceitful appropriation of assets such as inventory theft, payroll fraud, check forgery or embezzlement. Fraudulent financial reporting will have an effect on the