Phar-Mor Case

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Assignment Week 1 The Case of Phar-Mor Inc Devry University ACCT 525-15768 January 12, 2014 Abstract The Sarbanes-Oxley Act of 2002 was implemented with the sole purpose of assuring the investors in the financial reporting system. One example is a case such as Phar-Mor which fabricated their inventory in most of their retail stores in order to conceal a massive fraud by the leading executives. Or the Waste Management scandal which did things such as capitalizing items which should have been left on the income statement in order to increase their assets. Lastly, Enron, which had such an elaborate scheme in place that it was hard to decipher and was only uncovered when the CEO stepped down. It is not to say that SOX could have…show more content…
Title III, section 302. “Corporate Responsibility for Financial Reports” requires that all financial statements be examined for authenticity by the leading officers. Once examined and such a statement of authenticity is made that puts all liability of fraud, when caught, onto those individuals. In this this case it would have been Monus and Finn who would have been brought up on these charges. In the case of Phar-Mor, the leading officers were the ones conducting the fraud so their review of their own fraud would not have prevent them from continuing but it may deter them due to them being held fully liable. Waste Management Scandal The Waste Management scandal from the late 1990’s was described as “One of the most egregious accounting frauds we have seen," said Thomas C. Newkirk, associate director of the SEC's Division of Enforcement. (Cottrell, 2009) The majority of the fraud was centered around the fact that earnings were not growing as fast as projected so earnings were inflated. Waste Management executives avoided recording write offs which overstated their income statement by failing to record abandoned projects. They also capitalized items that should have been left on the income statement to increase their value on the asset side. It is documented that Waste Management’s auditor Arthur Andersen LLP (Anderson) entered into an agreement with Waste Management to help cover up such fraud in

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