Personal Narrative: Bad Debt

There is a widespread concern about rising levels of debt. Debt can become disastrous for those who live alone or those families who are already having problems with supporting their family. The people who might be struck by debt, they might have trouble recovering. Debt can cause Americans to lose their homes and stability they need to feed, and shelter their families. Although debt comes upon us Americans quickly, people can see debt as terrible thing to be stuck with. It has many disadvantages that can devastate to people.

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

Phar-Mor, Inc was a thriving discount grocery store in the late 1980’s. Phar-Mor was moving product quickly but profit margins were not significant enough to pay the bills. By the early 1990’s, Phar-Mor declared bankruptcy due to fraudulent financial reporting and misappropriation of assets, making it one of the largest frauds in U.S. history. Below, we will use auditing standard AU 316.85 Appendix A in conjunction with the video “How to Steal $500 million” to analyze how incentives/pressures, opportunities, and attitudes/rationalizations allowed for fraud to start and continue at Phar-Mor.

In the documentary Life and Debt, it is explained through the stories of local people, the economic and social crisis of Jamaica. With Jamaica receiving mandatory loans from the International Monetary Fund (IMF) in 1977 because of lack of alternatives, Jamaica was promised meaningful development. Unfortunately, this only made the situation worse because of the extreme policies and foreign economic agendas that came with the loans, forcing Jamaica into even further debt. Therefore, it is my opinion that it is because of the policies and greed of the IMF and The World Bank that came along with the loans, that Jamaica is currently 4.5 billion dollars in debt.

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 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 “Money as Debt” was created by Paul Grignon in 2006. It is the most fascinating video I have ever seen. Moreover, I am just amazed how much I have learned in just 47 minutes. This video describes how basic banking system works and answers the question where the money comes from.

I’ve been pursuing my education for my entire adult life. As a young and working mother I tried to fit night classes into my hectic schedule but never seemed to be able to string together enough credits to make it seem like it was worth the time. Then some years back, I began working for an employer that had tuition reimbursement so I took advantage of that - only for a minute; unfortunately the following year they took reimbursement out of their benefits plan, and around that same time the school notified me that my old college credits had expired and wouldn’t be used toward my degree. Their ‘Life Credit Portfolio’ was an option, but just barely. I decided that my time had passed and I should focus on saving money for my children’s college, and retirement.

There are several challenges in using financial information from previous periods in this audit. Mainly, the fact that Michael and Brian performed the audits of the previous year’s means that they are biased to believe and trust the information unequivocally. Secondly the fact that CMD was committing fraud by fabricating and destroying evidence and in some cases their third party clients were colluding along with them makes the evidence not trustworthy. An example of this is in the sales returns and allowances. Using the $4.5 million number and not accounting for the $5.3million fourth quarter number. This would seriously affect the company’s liquidity activity ratios Also, using the $7million figure that Michael and Brian came up with, when the number was actually $12million is a huge misstatement

     The documentary Life and Debt portrays a true example of the impact economic globalization can have on a developing country. When most Americans think about Jamaica, we think about the beautiful beaches, warm weather, and friendly people that make it a fabulous vacation spot. This movie shows the place in a different light, by showing a pressuring problem of debt. The everyday survival of many Jamaicans is based on the economic decisions of the United States and other powerful foreign countries.

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.

Life and debt by Stephanie Black is an extraordinary documentary about the major impact globalization has on third world under developed countries. Globalization is “the process of interaction and integration among the people, companies, and governments of different nations.” In the documentary Black focuses on the effects of globalization on third world countries such as Jamaica. In addition to that Black also shows the lives of farmers and factory workers who live in harsh environment due to competition with the wealthy and lack of

Jamaica is not just white sand beaches and mimosas. Behind the thin veil of paradise lurk corruption, violence, and inequalities. Life & Debt illustrates the daily realties of Jamaica following IMF structural adjustment programs. IMF reforms have perpetuated a cycle of debt that Jamaicans have little hope to escape. Although IMF conditionality claims to develop nations so that they can grow and re-pay their lenders, Jamaica is still indebted $4.5 billion dollars and has little development to show for it. Measures of austerity coupled with devaluation, high interest rates, and drops in local wages results in greater unemployment, increased violence, and widening inequality. The bulk of the film focuses on how global integration has undercut

At the time the fraud existed, internal controls were almost non-existent. The management team employed a number of improper accounting practices that did not comply with GAAP. As stated earlier, CEO Dean Buntrock not only allowed internal controls to be bypassed, he encouraged them to be ignored and shaped accounting policy with the sole purpose of making the targeted earnings numbers every year. The auditing firm, Arthur Andersen, LLP, was also shown to have complicity. The partners at Andersen knew that the company’s policies were not compliant so they provided Waste Management with proposed adjusting entries to their books. Waste Management refused to make the adjustments so Andersen had Waste Management sign off on a list of 32 steps the company must do to change its practices. The document legally constituted an agreement among the two parties and clearly shows that Andersen was aware of fraud that Waste Management had covered up in the past. Furthermore, Andersen did not stand up to the company and continued to

In my opinion, Peregrine recorded the "factoring" and assignment of their receivables as a factoring agreement and recorded the transaction as a sale of the receivables. They recorded the cash received and removed the related receivables from the accounts. By removing the receivables, they treated the receivables as if the risk of collection had passed to the bank without recourse. Peregrine concealed the revenue fraud by violating GAAP for financing arrangements. Because Peregrine had given the banks recourse, and frequently paid or repurchased unpaid receivables from them, Peregrine should have accounted for the financing arrangement as a liability and left the receivables on its balance sheet.