By manipulating the financial statements, the company gave a false impression on its future prospects of the company, allowing them to more freely raise capital through the issuance of common stock, and inadvertently inflating stock prices.
I was immediately intrigued from the beginning of Food, Inc. There was interesting and valuable information brought up during the film. Many people do not think about where their food comes from. I believe that if people were to know where their food comes from, they would not want to eat it. There are 47,000 products at a grocery store. But, Food, Inc. implies that this is in fact an illusion because all of them are made with the same crops. The fact that there are only a few multi-national corporations that control all of the crops and meat production is a huge surprise. I believe that each person in society would be absolutely shocked if they were to watch this documentary.
Fraudulent financial reporting is one form of corporate corruption and may involve the manipulation of the documents used to record accounting transactions, the misrepresentation of accounting events or transactions, or the intentional misapplication of Generally Accepted Accounting Principles (GAAP) (Crumbley, Heitger, and Smith, 2013). Examples of fraudulent schemes befitting of this category abound and usually involve financial statement items that have been misclassified, omitted, overstated, undervalued, or prematurely recognized. One case involving CEO Bill Smith of Moonstay
After reviewing the financial information of the Tech Tennis, USA, there was a concerned due to some unusual changes in the company’s accounts. Financial statements play a crucial part in the determination of the progress of an organization. It assists the relevant personnel to identify whether the company is making profits or making losses. Although unethical, some companies will tend to deliberately misrepresent some of their financial statement information to create a false impression of the company’s success. There are various techniques that organizations utilize to manipulate their financial statements such as overstating their revenues (Bierstaker, Brody, & Pacini, 2006). In addition, some organization will tend to inflate their sales without considering their cash flow amount that the organization has acquired which will be a red flag to investigate. Consequently, financial statements provide vital information that helps both internal and external users to understand the position of the organization. Some companies in an attempt to continue in the market, they end up manipulating their financial statements that create an illusion of the success of the organization.
In the later part of 1990s, there was an epidemic of accounting scandals which arose with the disclosure of financials transgressions by trusted corporate executives. The misdeeds involved misusing or misdirecting funds, understating expenses, overstating the value of corporate assets or underreporting the existence of liabilities, and overstating of revenues.
In the last few quarters, Tyson Foods has been facing tremendous pressures from rising food prices and slumping demand for their products. However, in spite of these issues, Wall Street analysts are optimistic that the company will realize strong annual growth in the next two years. To fully understand what is taking place requires carefully examining how current assets and liabilities are impacting executives' strategies. ("Tyson Foods," 2012) ("Tyson Foods," 2013) (Graham, 1976)
Chipotle is in the fast food segment, where setting up a food joint is easy. And acquiring suppliers and buyers is also relatively easy. But industries like these essentially work on customer trust and support. It is a rare case of how one small event can tarnish a company’s reputation overnight. It was probably something out of a nightmare for Chipotle’s employees when E. Coli was discovered in their food ingredients and discouraged customers to visit Chipotle stores. This also hit their stocks, and they never quite recovered from the downfall. Chipotle’s motto of serving food with dignity is something they have always stood by and adhered to. Thus, they wouldn’t have compromised on anything. (1) After initial trouble, which started in the summer of 2015, things have now relatively calmed down and Chipotle is doing marketing at an unprecedented level. Industries which are hit by health problems, rarely recover this fast. Its stocks and market reputation is bound to go down.
Smackey Dog Foods, Inc. was founded in the kitchen of sisters Sarah, Kim, and Jillian. The company produces dog food products made from natural ingredients. The business was such a success that the three sisters moved it out of their home to a facility. The business continued to do well, and the sisters opened a boutique division, Best Boy Gourmet, specializing in freshly manufactured one serving packages.
The proposed sale of Hershey Foods Corporation (HFC) during the summer of 2002 captured headlines and imaginations. After all, Hershey was an American icon, and when the company’s largest shareholder, the Hershey Trust Company (HSY), asked HFC management to explore a sale, the story drew national and international attention. The company’s unusual governance structure put the Hershey Trust’s board in the difficult position of making both an economic and a governance decision. On the one hand, the board faced a challenging economic decision that centered on determining whether the solicited bids provided a fair premium for HFC
From the beginning Diamond had put a focus on the commodity walnut market. The company had forged strong relationships with the growers of the nuts and held pride in continuing the positive relationship throughout the future of the company. So as the growers began to hand down larger costs, Diamond needed to find a way to ensure that the growers got the full amount they were seeking in order to keep ties strong and avoid the growers leaving Diamond for one of its competitors, while also continue to meet the earnings per share (EPS) expectations. According to the case filed by the SEC in 2014, “In February 2010, Diamond CFO Neil instructed members of the Finance Team to adjust the walnut costs to hit an EPS target for the second quarter. “Members of the Finance Team provided Neil with a walnut cost estimate that would result in reported EPS that would be higher than the consensus analyst of estimated $0.47 per share for the quarter” (SEC, 2014). However, the growers were not satisfied with this method of determining prices and threatened to leave Diamond if full costs were not received. Neil determined a way to close the gap through “continuity” or “momentum” payments. This technique allowed Diamond to pay the full amount that the growers were giving, but separated the costs out. Diamond only the portion on the financial
Following the risk assessment procedures, substantive procedures are designed and conducted to detect material misstatements of relevant assertions. Substantive procedures include analytical procedures and tests of details. Analytical procedures involve evaluations of financial statement information by a study of relationships among financial and nonfinancial data. Tests of details may be divided into three types. One test is the test of account balances to address whether there are misstatements in the ending balance of an account. In the case of Crazy Eddie, auditors should have put greater attention to inventory and accounts payable accounts. The second test is a test of classes of transactions to determine whether particular types of transactions have been properly accounted for during the period. Crazy Eddies fraudulently classified these transshipping transactions as retail sales to inflate its sales revenue and continue growth at existing stores. A key ratio for retailers is to compare growth in existing stores to growth from new stores. The third and final test is a test of disclosures to evaluate whether financial statement disclosures are properly presented. Crazy Eddie prepared bogus debit memos of over $20 million to understate accounts payable.
Financial statement fraud is any intentional or grossly negligent violation of generally accounting principles (GAAP) that is undisclosed and materially effects any financial statement. Fraud can take many forms, including hiding both bad and god news. Research shows that financial statement fraud us relatively more likely to occur in companies with assets of less than $100 million, with earnings problems, and with loose governance structures (Hopwood, Leiner, & Young, 2011).
ABSTRACT: Diamond Foods is America’s largest walnut processor specializing in processing, marketing, and distributing nuts and snack products. This real-world case presents financial reporting issues around the commodities cost shifting strategy used by Diamond’s management to falsify earnings. By delaying the recognition of a portion of the cost of walnuts acquired into later accounting periods, Diamond Foods materially underreported the cost of sales and overstated earnings in fiscal 2010 and 2011. The primary learning goal
However, during the implementation period, Dreyer’s faced the toughest moment in history. Its pre-tax earnings and stock price decreased dramatically due to a series of problems. One of the problems was the unexpected skyrocketing price of butterfat. Besides, the high cost promotion and the delivery system also became a heavy burden for the company. Because of these problems, Dreyer’s Grand Plan took much longer than they predicted to meet the recovery costs.
The executives of Waste Management, in order to save their jobs and keep/increase their personal bonuses, manipulated financial records in order to give the appearance to investors that certain earnings targets were