The Ethics Of The Sarbanes Oxley Act

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

* For example, SME or even big companies in order for them to maintain their performance in financing reporting is to get more people to invest. It possible they would manipulate by deceiving their financial reporting to impress more investor to invest.

Fraud is a false representation that is used to gain advantage or secure personal gains. While there are many different schemes used in committing fraud, the most commonly used fraud schemes are billing schemes, expense reimbursements, check tampering schemes, payroll schemes, and register disbursements. Billing schemes are the most common and are used in conjunction with fake or altered invoices for fictitious goods or services or personal activities. Check tampering is the scheme that carries the highest median loss and is committed by acquiring the funds of the organization and using them for personal activities. Payroll schemes involve falsifying compensation requests, such as timecards for fictitious or terminated employees and collecting

In Australia finance executives manipulate the financial records by using cookie jar reserve to inflate profits and fail to record expense. The Australian company overstated operating income in 2009 by 5% to meet analyst earning target. The CFO Wayne Banks agree to settle the charge and pay “disgorgement of $10,990 with prejudgment interest of $2,400, plus accept an officer-and-director bar of at least four years as well as a bar from practicing as an accountant on behalf of SEC-regulated entities for at least four years (SEC, 2015).” In CSC Nordic region and Denmark, it was also found that senor executive used financial manipulation and fraud to inflate operation results in the HNS

Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive

Financial shenanigans are used to hide or distort the real financial performance or financial condition of an entity. Such techniques are often referred to as “window dressing” or “cooking the books”. Those shenanigans range from minor deceptions (such as failing to clearly segregate operating from non-operating gains and losses) to more serious misapplications of accounting principles (such as failing to write off worthless assets; they also include fraudulent behavior, such as the recording of fictitious revenue to overstate the real financial performance). Since management is clever about hiding its tricks, investors and others must be alert for signs of shenanigans.

Businesses can also remove some accounts and reinsert them somewhere else in order to increase EPS or reduce tax liability. This can be done by listing expense accounts as capital acquisitions, thus, essentially listing ordinary debited expenses as credited owner’s equity and in turn falsely boosting profits. Other methods of manipulating accounts involve excluding accounts payables from the books altogether to reduce liability. The same fraud is also performed with loans and other short term liabilities by listing them as non-current, improving the equity of the business and increasing the share price. (ACFE, 2014) This was the method of fraud implemented in the WorldCom scandal, which is still

Financial statement fraud is usually a means to an end rather than an end in itself. When people cook the books they may doing it to buy more time to quietly fix business problems that prevent their entities from achieving its expected earnings or complying with loan covenants (Fraud Magazine, 2014. It may also be done to obtain or renew financing that would not be granted or would be smaller if honest financial statements were provided. People intent on profiting from crime may commit financial statement fraud to obtain loans they can then siphon off for personal gain or to inflate the price of the company 's shares, allowing them to sell their holdings or exercise stock options at a profit (Fraud Magazine, 2014). However, in many past cases of financial statement fraud, the perpetrators have gained little or nothing personally in financial terms. Instead the focus appears to have

Financial statement fraud is something that has become more commonplace than it should be. Many different events will often lead up to a rash of companies participating in financial statement fraud. Between the year 2000 and 2002 there were a number of factors that led to what appeared to be a perfect fraud storm according to our text (Albrecht, Albrecht, Albrecht, & Zimbelman, 2012). Nine of those will be looked at here. It will also be discussed as to what some of the common ways financial statement fraud is concealed while looking at some of the common motivations for such fraud. With this, a look at ways of financial statement fraud exposures can be identified along with who usually will commit this type of fraud.

Another major case of accounting fraud driven by the desire to build and protect one’s personal financial condition is the WorldCom debacle. Bernie Ebbers had to show continually growing net worth in order to avoid margin calls on his own WorldCom stock that he had pledged to secure loans.

In 2001, Enron Corporation went into bankruptcy due to the disclosure of false information in its financial statements. Similarly, when Lehman Brothers collapsed there was no evidence that it had ever publicly disclosed certain detrimental accounting information. Cases of accounting fraud such as these have become increasingly serious. Accounting fraud can result in creditors and stockholders losing confidence in listed companies, which negatively affects the whole worldwide economy. This paper will briefly analyse some of the causes of accounting fraud in listed companies, and then examine and evaluate three possible solutions to address the

Financial reporting frauds and earnings manipulation have attracted high profile attention recently. There have been several cases by businesses of what appears to be financial statement fraud, which have been undetected by the auditors. In this thesis, the main purpose is to identify some of the reasons why auditors have not detected financial statement fraud and to suggest possible

The regulators, SEC, U.S. GAAP, SOX of 2002, together with AICPA, PCAOB, and COSO concentrate on fraudulent reporting mechanisms and ways to lessen its occurrence. Inventors, public, and officials expect auditors detecting fraud to protect third parties interests. The auditors’ core responsibility is to confirm that financial statements are prepared fairly in accordance with U.S. GAAP. Therefore, auditors should comprehend real-world techniques to identify financial statement manipulation.

As the complexity and scope of business has expanded through the world, the need to track financial information has grown. There has been a corresponding increase in illegal financial activity according to separate surveys by the U. S. Department of Justice, Pricewaterhouse-Coopers, and the Association of Certified Fraud Examiners (ACFE) (Houck, Kranacher, Morris, Riley, Robertson, & Wells, 2006). An understanding of effective fraud and forensic accounting techniques can assist forensic accountants in identifying illegal activity and discovering and preserving evidence.

A financial statement fraud could come directly from management level where they deceive the numbers of revenue and expenses to satisfy the open market expectation or wallstreet