Fraud Cases: Violations of Generally Accepted Accounting Principles (Gaap)

1112 Words Apr 25th, 2012 5 Pages
Fraud Cases: Violations of Generally Accepted Accounting Principles (GAAP)

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In July 2002 the Sarbanes-Oxley Act was passed by the U.S. Senate by a vote of 98 to 0. The bipartisan support for the legislation emanated directly from the investing public’s lack of tolerance for financial statement fraud. Not surprisingly, when formulating its post-Sarbanes technical audit guidance, the Public Company Accounting Oversight Board (PCAOB) made it clear that detecting fraud must be the focus of the audit process. Consider that in the board’s first internal control standard (Auditing Standard No. 2), fraud was mentioned 76 times. The PCAOB has continued its emphasis on detecting fraud in its revised internal control standard,
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The second largest asset of the company (after vehicles, containers, and equipment) was land, in the form of the more than 100 fully operational landfills that the company both owned and operated. Under GAAP, depreciation expense is determined by allocating the historical cost of tangible capital assets (less the salvage value) over the estimated useful life of the assets.
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SEC, Accounting and Auditing Enforcement Release No. 1532, March 26, 2002. SEC, Accounting and Auditing Enforcement Release No. 2298, August 29, 2005. 3

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Section One Fraud Cases: Violations of Generally Accepted Accounting Principles (GAAP)

Unsupported Changes to the Estimated Useful Lives of Assets
From 1988 through 1996, management allegedly made numerous unsupported changes to the estimated useful lives and/or salvage values of one or more categories of vehicles, containers, and equipment.3 Such changes reduced
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