Fortex Scandal Essay

An implicit theme of this case that I want students to recognize is the contrast between the persistent and vigorous efforts of David Sokol to “get to the bottom” of the suspicious items he uncovered in JWP’s accounting records versus what Judge William Conner referred to as the “spinelessness” of JWP’s auditors. The JWP audits were similar to most problem audits in that the auditors encountered numerous red flags and questionable entries in the client’s accounting records but, for whatever reason, apparently failed to thoroughly investigate those items. On the other hand, Sokol refused to be deterred in his investigation of the troubling accounting issues that he discovered. The relationships that existed between members of JWP’s accounting staff and the Ernst & Young audit team apparently influenced the outcome of the JWP audits. Of course, the Sarbanes-Oxley Act of 2002

The Enron and WorldCom scandals were arguably the incidents that permanently changed the procedures for accounting controls. In response to these incidents, the Sarbanes-Oxley Act (SOX) of 2002 was passed. Once the knowledge of these scandals was made public, a number of subsequent accounting scandals were discovered in public companies such as Tyco International, HealthSouth, and American Insurance Group. In addition, a then-employee-owned company, Post, Buckley, Schuh & Jernigan, Inc. (dba PBS&J, now known as “Atkins North America, Inc.”), was also hit by a similar accounting scandal. Henceforth, a case study of PBS&J is presented where we will examine the fraudulent transactions that

The financial reporting problem at Molex was that, “the profit on inventory sales that the company made between its

Prior to the Tyco scandal, the company was one of America's largest conglomerates, with operating revenues of 38 billion dollars and 240,000 employees, worldwide. Tyco Laboratories began operations in 1960, performing experimental work for the U.S. government. The firm went public in 1964 and quickly expanded, mostly by acquisition, to exploit the commercial applications of its work. Dennis Kozlowski joined the company in 1975 as an assistant controller. The company subsequently shifted its focus from growth to profits within its three primary divisions: fire protection, electronics, and packaging. Kozlowski joined Tyco's board in 1987 and became president and chief operating officer two years later. Kozlowski

This course is the first in a two-part series that deals with auditing a company 's financial reports, internal controls, and

Q6. XYZ Ltd is a publicly listed company which has suffered from major sales declines, due to increased foreign completion, and has made a succession of losses over the past three years. During the year, its CEO resigned and was replaced by Chief Operating Officer (COO). The trial balance reveals that sales were $10,000,000 and the company made a loss of $500,000. At what level

associated with the Original Debt in the amount of $3 million remained unamortized as of

[pic]s a senior in a professional services firm, you have been assigned to plan the financial statement audit of a private company named Toy Central Corporation (TCC). In addition, the partner on the engagement has asked you to identify business risks that could adversely affect TCC’s sustained profitability, so that they can be brought to the attention of the company’s board of directors. These tasks will require you to draw on your knowledge of supply chain management, marketing, internal controls, audit assertions, and financial accounting.

In the August 2015, most of the Australian business media reported that the board of Federation Centre (“FDC”) sacked Steven Sewell as a Chief Executive Officer (CEO) and then replaced him with Angus McNaughton as a new CEO. This removal subsequently surprised investors and markets because it occurred just two months after the completion of the merger between FDC and Novion Property Group (“Novion”). Moreover, there is no further explanation from the board of FDC about the reason of removal Steven Sewell. Consequently, the shares of the FDC declined 6% since the replacement.

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.

The auditing firm has been in engagement with the company throughout the period when the fraud was being committed. One of the common and clear indicators of possible fraud was the company’s cash flow statement. The company experienced positive growth in its profits from the year 1996 through to the year 1998. However, a close analysis of the cash flow statement shows that the company had experienced negative figures of cash flow from both operating and investing activities and positive cash flow from financing activities which would not sufficiently offset the negative cash flows from operating and investing. It is therefore evident

This essay explores the corporate collapse of Harris-Scarfe on April 3 2001, which before their collapse was Australia’s third largest retail group (Buchanan 2004, p. 55). It will explore the collapse in the context of the auditing framework. In particular, how the financial indiscretions were not discovered by the auditors, which were going on as early as six years prior to the collapse (Buchanan 2004, p. 62). To start with, we define what the auditing objective is in order to work out where it failed in this case. ASA 200.11/ISA 200.11 defines the auditing objective as one that needs to ascertain reasonable assurance that the financial report as a whole is free from misstatement, whether due to error or fraud. In doing so the auditor can give an opinion of whether the financial report was prepared in accordance with the financial reporting framework (Gay & Simnett 2012, p. 12).

A number of financial statement frauds went undetected from auditors in past and attracted a high profile attention. The businessmen add fake assets or transfer the assets of companies to their personal assets and result in accounting scandals when the affected companies are bankrupted or are even close of bankruptcy. Just to mention a few names, accounting scandals of Enron, AOL Time Warner and Xerox are among the hottest accounting scandals of the century. This means that despite presence of professional auditors accounting scandals happen and there is a need to learn from the mistakes of the auditors who overlooked these activities. In this report the case study of Xerox is analyzed in detail to highlight violations of accounting principles and present an example from which lessons can be learnt for the future.

An important function of the accounting field is to provide external users of financial statements with assurance that the financial information being presented is both reliable and accurate. This basic function of accounting is so important that there is an entire field of experts, called auditors, dedicated to assuring its proper performance. Throughout history there have been many instances in which the basic equilibrium between an institution and current/potential investor has been threatened due to a lack of accountability and trust between the two parties. This issue has been the catalyst for many discussions regarding the proper procedures a firm should follow in order to provide

Since reliable financial information is essential for investors and other stakeholders to take adequate decisions, this reliability must be backed by independent review performed by independent and certified auditing firms, which are supposed to verify and certify financial statements issued by a company’s management. If the auditor is not competent and independent from management, the audit of the financial statements loses its credibility (Schelker, 2013, p.295). According to Impastato (2003), because of audit failures, accountants are to blame for investors losing billions of dollars in earnings in addition to market capitalization (as cited in Grubbs & Ethridge 2007).