Case Study On Auditing Scandal

Stephen Richards’s actions were extremely serious; manipulating Computer Associates’ quarter end cutoff to align CA’s reported financial results with market expectations by violating the generally accepted accounting principles and their financial reporting responsibilities. According to the U.S. Securities and Exchange Commission, Richards with other CA executives extended CA’s fiscal quarter, “ instructed and allowed subordinates to negotiate and obtain contracts after quarter end while knowing, or recklessly disregarding the fact that, CA would improperly recognize the revenue from those contracts, and failed to alert CA’s Finance or Sales Accounting Department that CA salespersons

This $490 million came from the netting manipulation when they offset their expenses with unrelated gains on the sale of assets. The geography manipulation allowed them to move millions of dollars to different sections of the income statement to “make the financials look the way we want to show them” said James Koenig, one of the primary forces behind the scandal. However, none of the fraudulent activities would have gone unknown for so long without the aid of the auditors, Arthur Anderson LLP, involved with Waste Management.

Since their prices were way too low, eventually profit margins began to decline very fast, this resulted in millions of losses. Instead of disclosing and recording these losses, President Monus along with the CFO Pat Finn and two other high ranking officials, decided to cross out the correct numbers insert highly inflated numbers, during this a sub ledger with the real numbers was also being kept. After a few months of this practice Pat Finn the CFO took on the responsibility of altering the numbers. By mid 1990 Monus's refusal to raise prices led to even more cover ups and eventually more members of the organization began to get involved in the fake reporting including the manager of accounting and the Controller. By the time the fraud was discovered executives at Phar-Mor had misstated financial statements by over $500 million.

Most notably was the Tyco International scandal which happened in 2002, during which the SEC filed fraud charges against the CEO of Tyco, Dennis Kozslowski.

Are businesses in corporate America making it harder for the American public to trust them with all the recent scandals going on? Corruptions are everywhere and especially in businesses, but are these legal or are they ethical problems corporate America has? Bruce Frohnen, Leo Clarke, and Jeffrey L. Seglin believe it may just be a little bit of both. Frohnen and Clarke represent their belief that the scandals in corporate America are ethical problems. On the other hand, Jeffrey L. Seglin argues that the problems in American businesses are a combination of ethical and legal problems. The ideas of ethical problems in corporate America are illustrated differently in both Frohnen and Clarke’s essay and Seglin’s essay.

The market lost billions of dollars and stock prices plummeted in result of the scandals of

The executives of the company failed to exercise proper judgement on behalf of their principals. The senior officers and professional accountant acted in their own self-interest rather than for the benefit of the shareholders. A director is legally expected to make judgements in the best interest of the company and its shareholders, and perhaps some benefits will flow to other stakeholders and the public interest (Brooks & Dunn 2014). Moreover, both HealthSouth and Enron were charged with accounting fraud, as HealthSouth cheated on accounts and falsified documents, and Enron kept huge debts off the balance sheets and led to

In March 2004 the SEC filed civil lawsuits against Preston D. Hopper, and Tamela C. Pallas, for fraud and other securities law violations. The complaint alleges that Pallas orchestrated the sham transactions to simulate robust operations within CMS's marketing and trading subsidiary. Hopper failed to ensure the disclosure of the true nature of the trades. Hopper sponsored improper accounting for the sham transactions and that, when CMS's outside auditors forced CMS to reverse the reporting of the round-trip trade revenue, Hopper fraudulently failed to disclose the reasons for the reversal. The Commission is seeking in its civil suit that there be monetary penalties and that the court prevent them from serving as officers or directors of any public company.

The audit senior has produced this report as a result of management restricting access to significant evidence, resulting in a lack of evidence to support the capitalization of research and development costs as an intangible asset. The audit senior is correct in identifying that limitation on scope has been imposed by management. The results of trials and tests of new drug would be a vital element of must audit work and without the results to demonstrate that the development costs will lead to future economic benefit, it is not possible to conclude that the accounting treatment is correct. However the imposed limitation has not been explained in audit report. A paragraph should have been included in the report which explains the matter giving rise to modification.

The amount of money misstated was around $5 billion.What were the violations?The SEC’s report reflects the following violations by Freddie Mac: 1) Use of certain transactions to nullify the transitional effects of the accounting standards. If the revenue is overstated, the net income increases. The accrued revenue means company has earned the revenue but hasn’t received the cash yet. The manipulation of accrued revenue was done in this case to inflate the income. “The Company engaged in a series of transactions having principally an accounting purpose that were designed to minimize or eliminate the true impact of changes in Generally Accepted Accounting Principles (“GAAP”) – specifically SFAS 133, which introduced additional earnings volatility – and that allowed the Company to falsely portray

through the proper channels (Cascarino, Richard E., 2012, pg. 10). Most company’s experience an issue with fraud at one point in its operations. It is very unusual to find an entity that has never had to handle fraud in any aspect. Regulatory challenges in “controlling fraud goes beyond giving the appearance” of attacking the issue by combating with some of the fundamental causes (Cascarino, 2012, pg. 130). It is very important to try and have controls set to deter fraud to the very minimal amount, however it is imperative to continue theses controls well into the future to ward of any other fraudulent attacks (Cascarino, 2012, pg. 130).

| * David should keep a straightforward and honest relationship with MAL. * David integrity will be compromised if these errors are discovered.

Xerox is an American corporation having its headquarters currently in Norwalk Connecticut. The headquarters of the company moved from

Cable provider Adelphia was one of the major accounting scandals of the early 2000s that led to the creation of the Sarbanes-Oxley Act. A key provision of the Act was to create a stronger ethical climate in the auditing profession, a consequence of the apparent role that auditors played in some of the scandals. SOX mandated that auditors cannot audit the same companies for which they provide consulting services, as this link was perceived to result in audit teams being pressured to perform lax audits in order to secure more consulting business from the clients. There were other provisions in SOX that increased the regulatory burden on the auditing profession in response to lax auditing practices in scandals like Adelphia (McConnell & Banks, 2003). This paper will address the Adelphia scandal as it relates to the auditors, and the deontological ethics of the situation.

Needed for the Houston office of Andersen, an audit partner that understands the role of being a "public watchdog" with "ultimate allegiance to the creditors and shareholders" . Arthur Anderson abandoned its roles as independent auditor by turning a blind eye to improper accounting, including the failure to consolidate, failure of Enron to make $51million in proposed adjustments in 1997, and failure to adequately disclose the nature of transactions with subsidiaries . Another example is Lord Wakeham joined Enron as a non-executive director in 1994 and also sat on Enron's audit and compliance committee. In addition, Andersen also provides internal audit service to Enron, which in fact impact