Generally accepted accounting principles (GAAP) allow companies wide latitude in the choice of accounting policies. After a firm chooses a set of accounting policies, current accounting rules permit changes from one alternative policy to another at the discretion of the management. Since reported accounting figures are widely used by a number of external parties, managers of firms have incentives to choose accounting policies in order to influence the behavior of these parties. A variety of managerial motives for
Fraud: Dishonest, confidentiality-breaking, financially sneaky employees, customers, and business partners exist. One wrong move and the fraudulent person can damage the company's reputation and image to the point of closure.
References Association of Certified Fraud Examiners (ACFE). 2006. 2006 ACFE Report to the Nation on Occupational Fraud and Abuse. Available at: http://www.acfe.com/documents /2006-rttn.pdf. Beasley, M., J. Carcello, and D. Hermanson. 1999. Fraudulent Financial Reporting: 1987–1997 An Analysis of U.S. Public Companies. Washington, D.C.: Committee of Sponsoring Organizations of the Treadway Commission. Berenson, A. 2003. The Number: How the Drive for Quarterly
I would decide to take no action, however I will resign to prevent any troubles that may occur as an insider of the company’s fraudulent practices if they are caught in the future.
Accounting aspects have been several in amounts. They lay out ground rules for succeeding in
A. accounting functions must be performed by an "outsider" (rather than by an employee of the business) in order to avoid conflicts of interest
The ethic case study was about an anonymous caller who is the controller of a privately-held, small, start-up company. The company was experiencing a severe cash shortage and was required to present the quarterly financial statements to the local bank, in order to begin receiving funds for the line of credit again. She had concerns that the senior executives of the company provided the local bank with misstated financial statements. The caller was later informed that the accounts payable clerk was instructed to record sales transaction generated by the Chief Executive Officer (CEO) of the company. As a result, the sales and receivables accounts were overstated in the
Internal fraud consists in “a type of fraud that is committed by an individual against an organization. [Furthermore], a perpetrator of fraud engages in activities that are designed to defraud, misappropriate property, or circumvent the regulations, law, or policies of a company”[8]. Not only has the incidence of internal fraud increased in frequency because of the availability of sensitive information such as client details or confidential business documents; moreover, this type of fraud is found in various types of organizations, ranging from corporations, public service institutions and financial institutions. Our analysis will concentrate on the most common and prolific types of internal fraud, namely identity theft, insider trading, loan fraud and wire fraud. Interestingly, PriceWaterhouseCooper conducted a survey that revealed that the “demographics of a typical fraudster are as follows: males (85% of cases), 31-50 years (72% of cases), reached high-school level (50%), Bachelor’s or post graduate degree (50%) and middle or senior management (52%)”[9].
This subject company in this case study is WoolEx Mills. The top management team at the Mills had to act fast to prevent the accusations charged upon them, so that they may venture deep into the United States market. In the process, they had to act in a way that will present the company’s financial statements; cash flows in a way that they did not show any suspicious fraudulent activities. The type of fraud in this case study is known as manipulation of accounts which involves the act of offering the accounts in the way they are not in reality.
These frauds essentially amount to trickery; the perpetrator fools the company into handing over its money.
There were 347 alleged cases of fraud involving public company according to Fraudulent Financial Reporting: 1998-2007 sponsored by Committee of Sponsoring Organizations of the Treadway Commission (COSO, 2010) that were investigated by Securities and Exchange Commission (SEC) on May 2010, which is showing 53 increased in the number of fraud when compared to the 1987-1997 study (p.5). COSO’s result is a sad number in a 10 year period, which averaging close to 35 accounting frauds a year (p.5). COSO’S study shows out of the nearly 350 financial frauds investigated 60% were identified to involved improper revenue recognition and 89% were recognized the CEOs and/or CFOs involvement (p.5). COSO’s research
Discuss the nature of the fraud and the impact to the company as a result of the fraudulent activity.
When talking about accounting, the first thing we should know is the history of its development. Traditionally, the development is from inductive to deductive. Inductive theory assume what is done by the majority is the most appropriate practice. However, It did not seek to evaluate the logic or merit of
Ethics in any industry is important, but for Accounting professionals and those in need of their services, it is a particularly stressed element. Information provided by accountants is used to make major decisions, including investing, downsizing, expanding, etc, so accountants are expected to be competent, reliable, and have a high degree of professional integrity. Because of these high expectations, the professional accountancy industry, like many other professions, has adopted professional codes of ethics (Woelfel, 1986). These ethical codes go above and beyond the requirements for state or federal laws and regulations. There are several professional organizations within the
2001. It was the year that every individual; man, woman and children on Earth would remember. There was the September 11 event which was considered the worst terrorist attack that has happened in U.S. history, killing a total of 2, 977 people. And not long after that, in the business world, on December 2, the greatest corporate failure was exposed. The crash of Enron in US, followed by the worldwide collapse of its auditor, Arthur Andersen became one the most popular accounting scandal where it is still being talked about even after a decade has passed. Following this scandal, other massive organizations like WorldCom (2002), AIG (2004), and Satyam Computer Services (2009) shared the same fate. Since then, there have been questions being