Lernout & Hauspie Speech Products. Essay

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Lernout & Hauspie Speech Products.

The unique characteristics in L&H that made it prone to fraud were the rapid expansion and acquisition of companies beyond their boundaries, and the inability to oversee these operations. The one thing that stands out is the lack of ethical values from the founders of the company from the initial stages of the firm. Mr. Hauspie’s creative but legally acceptable financing plans to retain control of the company while selling minority interests. The desperate ambition to succeed fueled with the accounting skills the company was in a prime position to engage in fraudulent practices. The tone at the top did not set a code of ethics, instead wanted to maximize their value of the futuristic software.

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As seen in the complaint filed by them, they accused L&H of inflating revenues, antedating contracts, to manipulate ratios. So, they did know of some practices, but were reluctant to follow through and be independent and abide by their code of conduct. The reason as to why they went along with these aggressive accounting practices could be many. One reason could be that L&H may have been one of their most profitable clients and were fearful of losing their client. They wanted to be associated with one of the largest and upcoming technology firms, a way of marketability when investors saw their audit reports. Although it appears that they were on the right track questioning about the collections, they did not probe deep enough to find the source, the audit team did not have a good oversight from the partner or the in-charge. This clearly reflects the tone that they were willing to compromise with the evidence.

One of the first things that could have been done was set the standards at the top level of the company. A good business practice that embodies the values of its customers, shareholders, and its employees is a good place to start. Upright code of ethics and conduct, set of structured policies and procedures, proper internal control as they were a software company, an accounting team that are true to their practices are all things that can be implemented to avoid further fraudulent
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