Listed Company's Accounting Fraud of the Causes and Prevention

Throughout history and in our own time, legitimate accounting methods have been utilized to fraudulently engage in manipulating activities that results in illicit gains to the perpetrators and losses to individuals and financial institutions.

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

The manipulation of accounts fraud scheme is generally fulfilled by employees in top management positions and it usually involves making understatements or overstatements on financial statements making it very hard to detect. The process followed as Troy Adkins, (2015) explains is very simple. The financial statements are either overstated to show different figures in the earnings on the income statements making them look better than they actually are or the earnings in the current periods are manipulated in such a way that the revenue is understated or they inflate the current year’s expenses. The second process includes making the financial statements look worse than they are in reality. Deloitte, (2009) explains a number of ways which the accounts are manipulated where as one of the ways is to manipulate the reported earnings directly. They further explained that overstating the

Insider dealing has been affecting the efficiency of stock markets in different places like United States, United Kingdom and Australia. Hong Kong is of no exception. Basically, insider dealing refers to the trading of a corporation’s stock or other securities by individual with potential access to non-public information of the company. The law of insider dealing in Hong Kong provides a much more detailed definition and is very comprehensive. However, when it comes to enforcement, it seems not very effective. In the following, the law of insider dealing in Hong Kong will be summarized. After analyzing the comprehensiveness of the law, the underlying reasons of the difficulty in enforcement will be identified. Some

Fraudulent, erroneous, and illegal acts committed by a public company, usually at a managerial or executive level, have been a very serious problem for many years and have prompted development of strict and updated regulations, such as the Sarbanes-Oxley Act, in an attempt to prevent these occurrences. Unfortunately, these new or updated regulations are not enough to prevent these acts from happening, thus not alleviating the auditors of their responsibility to detect fraud. Some methods that management and auditors can employ to prevent and detect fraud, errors, and illegal acts are: improving knowledge, improving skills,

Deeply influenced by the culture, tradition, and the social system Chinese accounting system is tightly controlled by the government which is Ministry of Finance of China. According to Wei-guo Zhang (Weiguo Zhang. China’s challenge: Building an accounting system. 1996), this feature is the “unique feature of Chinese accounting methods.” Ministry of Finance is the most powerful financial department of Chinese government which handles all the businesses of finance, accounting, and economics. It has the major power of decision-making of accounting standards; cares about the setting of accounting standards; monitors the implement of the accounting standards and modifies the accounting standards.

The article “PetroChina: International Corporate Governance with Chinese Characteristics” describes the major concerns about PetroChina’s corporate governance when and after it was listed on NYSE and HKSE, which was the first Chinese state-owned enterprise launched IPO overseas. This paper is based on the information provided by the article and will discuss in three aspects: Firstly, why corporate governance was important for China’s SOEs? Secondly, what were the special problems associated with PetroChina’s corporate governance model and what could be done to improve it? Finally, the postscript: the things I learn from this case study.

Corporate governance represents the structure associated with the management of activities at a firm in a manner that ensures the protection of the shareholders’ residual claims. Further, the concept elaborates the mechanism instituted at the organizational level to ensure that business operations conform to various legal, ethical, and social expectations. China represents one of the most dynamic and fast growing economies across the globe. The expansion of the Chinese market highlights the necessity for the adoption of business practices that reflect not only the national conditions but also international practices (Holmes & Wong, 2015). Issues concerning culture, laws, enforcement, and the constitution of boards in the Chinese environment should be reconsidered for China to sustain its momentum as one of the dominant emerging economies. The “Code of Corporate Governance for Listed Companies in China” provides the legal framework that underlines the structure approved for Chinese businesses (Holmes & Wong, 2015).

The biggest problem of Alibaba Corporate Governance is management powers, because Alibaba Corporate Governance structure lack of stockholder rights and independent board representation to select board members and have a nominal in the management of the company. Although the board of directors in publicly traded companies always fail in their responsibility to protect the interests of shareholders. Alibaba has deprived even this minimal power ways from shareholders which isn’t sufficient respect of shareholder rights in the structures being proposed. In Alibaba has a permanent lock on control of the company but hold only a small minority of the equity capital known as the Alibaba Partnership. This

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).

This paper will encompass the importance of the U.S stock market/stock exchange versus the Chinese stock market/ stock exchange, with a brief introduction about how each stock market/stock exchange came into existence, the importance of each stock market/stock exchange, how the U.S and Chinese manage their stock markets/stock exchange, how corporations are appointed plus the rules and regulations. This will also entail random facts about each stock market/stock exchange. Stock markets are like hitting a royal flush, if the price of your stocks goes up, you win; if it drops, you lose! The stock market, also known as the fairness market, is one in which shares are owned by companies and their shareholders. The companies that are on the stock market, its stocks are issued and traded publicly, through either exchanges or over-the-counter markets. The stock market is considered to be one of the most critical components of a gratuitous-market economy that provides companies with access to dominance in exchange for giving investor’s the opportunity to have some type of possession of the company. The stock market gives those the power to invest monies, and to capitalize on their gains. This in return can bring about wealth to some without having to take a financial risk in starting up a new business.

Many organizations have been in the news over the past few years due to accounting ethical breaches that have affected their customers, employees, and the general public. I searched the Internet to locate a story in the news that depicts an accounting ethical breach. I selected Krispy Kreme. I enjoy their hot donuts and was curious to learn more about how they played with the numbers. For some reason I always want to dig into the trickery behind the manipulation of financial statements.

The video “Cooking the Books” discussed the ZZZZ Best case of fraud, it tells how and why fraud was perpetrated by Barry Minkow and why it was undetected for so long. According to the video, ZZZZ Best was founded by Barry Minkow in 1982; when he was sixteen years old, it started as a carpet cleaning company. But, due to high competition in the industry, low entry barriers, and bad internal control, this young entrepreneur started to have cash flow problems, thus creating a shortage of working capital. As a result of the financial pressure, he started to commit fraud by creating false accounts receivable and sales, false documents (using photocopies of real

Compared to global standards, the development of China’s financial market still remains an early stage. It has existed for only 25 years since Deng conducted the reform and opening-up policy in China. As a result, the market is not yet mature and full of rumors and speculators. Mom-and-pop investors who have only limited understanding of what the market is and, more importantly, how it works are everywhere in the stock market. These individual investors drive more than 80 percent of trading on bourses in Shanghai and

The Stock Exchange of Hong Kong (SEHK) describes corporate governance as the “duties, functions and power of the board of directors as a whole and executives and non-executive directors individually”. These binding responsibilities include the fulfillment of their legal obligations towards the