Accounting Fraud at WorldCom 1) What are the pressures that lead executives and managers to “cook the books?” After the rapid evolution of the telecommunication industry in the 1990s‚ WorldCom shifted its strategy to focus on building revenues and acquiring capacity sufficient to handle expected growth. Their biggest goal was to be the No. 1 stock on Wall Street rather than capturing the market share. As a result‚ their Expense-to-Revenue (E/R) Ratio was their measurement for their main objective
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Qualify or Not? Acc/260 November 3‚ 2013 Qualify or Not? Viccio and Martin staff accountant Jane Ashley was assigned to work on an audit team with one senior auditor Frankie Small. The audit they were to perform was on the top paying client of Viccio and Martin‚ Models Inc.. Jane had spent time working for the firm while finishing her academics‚ and had been present for many other audits. This left her excited to show her employer all she had learned during this first assignment. Jane
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Saunders‚ Lewis and Thornhill: Research Methods for Business Students‚ 6th edition‚ Additional Case Studies Case 8a The involvement of auditors in preliminary profit announcements Tony Beasley and Jim Keane‚ University of Gloucestershire Each year UK companies publish and issue an annual report and audited accounts‚ which are sent to numerous shareholders and other users. The process may take as long as three months from the end of the companies accounting period. This delay could create problems:
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conceptual design based on certain aspects that are considered to have an effect on the auditor’s capability to endure stress. It has been suggested that‚ given the shut working connection between auditors and customers and the fact that auditors are paid by their customers‚ it is emotionally impossible for an auditor to be free from prejudice. Numerous aspects of concern have been noted in the literary works for many years. Shockley’s conceptual design highlighted on recognized mobility because being
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What role did the accounting profession play in the recent subprime mortgage crisis? What could they have done differently? An independent auditor has a duty is to: identify‚ measure‚ and communicate financial information about an entity for decision making purposes. They are also responsible for generating the financial statements/reports for an organization. (Marshall‚ McManus‚ Viele‚ 2008) The subprime mortgage crisis is the result of contract laws allowing lenders the securitization of subprime
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Prior to 2002 companies didn’t have much internal control set in place and even if they were it was loosely enforced. This was all to the benefit of the top executives that could easily change figures and report false financial statements for personal gains. It was established that a separations on powers and responsibilities was needed to ensure that one person could not adjust anything by themselves without anyone having to check their work. This meant
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difficult job and he started getting complains from the headquarters of his poor performances. Nashwinter tried hard to improve the situation but he didn’t see any improvement. Eventually‚ he started making false inventory on his monthly performance reports to headquarters. Nashwinter increased the gross profits by increasing inventory balance and reducing cost of goods sold. He thought that the Division will make enough profit one day to justify his fake numbers but that day never came. Finally‚ in
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What is Fraud? Fraud occurs when individuals purposely materially misstate facts with the intent of coercing someone to believe these misrepresentations. Upon believing the misrepresentation‚ individuals will act upon them and suffer a loss or damages. Fraud occurs in various forms: 1. Misappropriation of assets 2. Fraudulent financial reporting 3. Employee fraud 4. Management fraud The Fraud Triangle * Motive/Incentive: a reason to commit the fraud * Opportunity:
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barter transaction that passed materiality by auditors. This mistake however shouldn’t have passed and was a scheme operated by the CFO who knew the materiality of the testing. Todd Katz [VP of Sales]: Creates phoney sales transactions that would soon be investigated by the SEC. Without these two fraudulent representations‚ The North Face would have reported a net loss for the first quarter of fiscal 1998. The cumulative overstatement found by auditors and the SEC was $1.3 million in gross profit
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THE ROLE OF AUDITORS IN THE CONTEXT OF CORPORATE GOVERNANCE Asst. Prof. Loganathan Krishnan Abstract Auditors examine company’s accounts and report to the company on the accounts. Fundamentally‚ the concern is how auditors carry out these duties effectively. Legislations namely Companies Act 1965‚ Securities Industry Act 1983 which has been consolidated as Capital Market and Services Act 2007 have made major inroads to ensure that auditors carry out their duties and obligations effectively. Additionally
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