Miniscribe Essay

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 financial crisis of the early 2000s left many investors and stockholders nervous about the accuracy of financial statements issued by public companies. The financial crisis resulted after many previously successful companies suddenly tanked due to restatement of their financials. These companies include Enron, Tyco, Sunbeam, Rite-Aid, Xerox and WorldCom amongst others (Kieso, 2014, p. 17). How could many previously successful companies suddenly go belly-up? The evidence was to be seen, these companies had used malicious accounting techniques to hide massive amounts of debts and increase their assets without having to show them accurately in a fair and honest way on their financial statements.

The section 302 in Title III - “Corporate Responsibility for Financial Reports”, would have made the CEO and CFO, which are Monus and Finn, respectively, state their understanding on how fair the financial statements presents the condition and result of operations in all material aspects. In part 5, this section also requires disclosure of significant deficiencies identified in internal control to the auditors and audit committee, among other disclosures related to fraud.

several actions that led to Enron’s bankruptcy. The issues were with the accounting method used as well as the negligence in the methodology of the company’s administration. Although once upon a time it was at its best, but gradually due to mismanagement, lack of sufficient business, improper business strategies and greed of the employees and the leadership all together became the reason for Enron’s bankruptcy. Under the section of Federal Bankruptcy Code, giant companies seek financial protection. Even it allows the company to protect itself from such threats, still all of the above were neglected by Enron Corporation.

What are the pressures that lead executives and managers to “cook the books?” There are several factors that can come into play. For WorldCom, it started with the deterioration of the industry in 2000. This was due to overcapacity, heightened competition, the economic recession, the dot-com bubble collapse, and a reduced demand for telecommunications services. All of these factors put extra pressure on WorldCom’s most important performance indicator, the expense-to-revenue ratio. The company was so concerned about keeping it above 42% that they were willing to do anything, even commit fraud. Bernie Ebbers told the senior staff that they would lose everything if the company did not improve its performance.

2. Identify specific audit procedures that might have led to the detection of the following accounting irregularities perpetrated by Crazy Eddie personnel: (a) the falsification of inventory count sheets,

The thing that happened was the company inflated assets by as much as $11 billion, leading to thousands of lost jobs and $180 billion in losses for investors. The main player CEO Bernie Ebbers, he did not report line costs by utilizing rather than expensing and had false accounting entries to the company. Eventually he got caught and their auditing department uncovered $3.8 billion in fraud. They were faced penalties from all of this and the CFO was laid off, controller resigned, and the company filed for bankruptcy. Ebbers was sentenced to 25 years of fraud, from his horrible mistakes.

Inflated sales, profit margins, and account receivables, while failed to disclose direct competition from entities related to its chairman.

The collective understanding of all the three investigative agencies’ records in September 2012, four months after the criminal complaint was filed, detected ‘systematic mismanagement’ in the running of the company, and the keeping of its accounts. The mismanagement included violations of business procedures (over-invoicing and overvalued invoicing, for instance), which in turn could have led to income tax violations.

Based on the fact that the CFO and company has lied before about a very serious matter, as auditors, we would have to exercise a high level of professional skepticism going forward due to the increase in both inherent and control risk. We have to be sensitive to all information regarding the company, especially when the information is tied to the company’s management. Our responsibility for this situation all depends on the extent of the impact of the CFO’s illegal act

The Molex Corporation is an electronic connector manufacturing firm, which is based in Illinois. This company is facing a financial reporting problem in which the financial statements were overstated. Joe King ,the CEO of the company, was appointed in July of 2001, and was responsible for managing and inventory control, among other very important duties. Diane Bullock was hired in 2003, to replace the previous CFO. Both Bullock and King were being accused of what? by the external auditors, Deloitte & Touche, for not disclosing an 8 million pre-tax inventory valuation error.

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

Accounting anomalies result from unusual processes or procedures in the accounting system. Several accounting anomalies are a result of fraudulent transactions. The three common accounting anomaly fraud symptoms involve problems with source documents, faulty journal entries, and inaccuracies in ledgers. In most cases poor accounting records are indications or symptoms of fraud rather than mere errors. With time being spent on fraud scheme it could be difficult to keep a proper accounting record or record transaction properly to cover up the fraud.

Both the external auditors and board of directors were blameworthy in this case. As mentioned above, Arthur Anderson 's auditing system did not have the ability to detect the fraud as they relied on the information being

What was going on internally at CUC International and later at Cendant was known to many employees, these people held different positions from managers all the way up to the CEO Walter Forbes and it was in fact two managers that came forward and brought all of this out to the open and their names were Casper Sabatino and Steven Speaks. They contacted the CFO of Cendant Mr.Monaco and explained to him the breathtaking fraud. And it was Mr.Monaco who delivered this news to Cendant’s Chief Executive Henry R. Silverman. Those two men were the whistleblowers that brought Cendant to its knees. As mentioned in the sworn affidavits the managers explained what was happening at Cendant, they said that they were told to record millions of dollars of orders that never occurred and were told to do what was necessary in order to increase the income on the books and decrease the expanses. In their statements they named two people whom have been responsible for putting pressure on their employees and ordering the accounting irregularities, these two people were Cosmo