Issues: Can a company be held liable for fraud when they engaged in transactions with a corporation in order to intentionally inflate that corporation’s financial statement, even though there were no public statements concerning those transactions,…
Management’s alleged scheme for inflating revenue is that in 2001, when the company was not able to meet their sales and revenue goals, they would record sales on the books as soon as products left the warehouse. So if ClearOne shipped a lot of products during the last week of the quarter (or swept the floor as they call it), they would be able to meet their revenue projections. So basically, they manipulated their revenue by placing significantly large orders during the last few days of the quarter. The CEO then had an agreement with other companies or third party garages to send them the shipments at no cost, until the shipments were sold and at no risk to that third party. After the shipments left the warehouse, ClearOne would list the revenue as a receivable on the transaction. ClearOne continued to do this at the end of every quarter, which conflicts with the GAAP principles.…
Fraud symptoms relate to the participation or concealment of fraud. One of the most noticeable red flags was WoolEx Mills’ lack of internal controls, which significantly impacted the company. The lax internal controls stemmed from an ineffective management with a CEO delegating orders to commit fraud. Management also participated in kickbacks, but A&M suggested switching vendors would reduce costs by 5-10%. Fictitious revenues overstated Sales and Accounts Receivable with the latter negatively impacting WoolEx Mills’ cash flows. In addition to overstating Sales, the company neglected to report Sales Discounts or Sales Returns and Allowances. Further examination would be needed to determine the existence of the transactions. Finally, management continued to utilize outdated equipment and neglected to maintain the manufacturing plant (Krishnan & Shah 2015) (Fraud Red Flags…
Donnelly also used fictitious expense reimbursements schemes to defraud her company. This type of scheme follows Exhibit 7-6 in Wells’ text. Donnelly prepares a report claiming a fictitious expense such as samples. Donnelly would use a credit card statement as her supporting document and then again forge her supervisor’s signature to gain approval. The expense report is sent to accounts payable and a check is issued…
The ethical consideration in this case is that Danny Feeney, Laura McAntee’s new supervisor is asking her to commit fraud in order to make financial gains for the company. This is a practice that Mr. Feeney had previously established as he was the assistant Treasurer in charge of making sure the company’s high credit rating was maintained and taking advantage of cash discounts. The retailer has a centralized location for all its accounting, so there was no “check and balance” in place. Because Mr. Feeney was able to keep the company’s credit rating high and was able to get the company’s creditors to accept late, discounted payments the practice has continued and he was ultimately rewarded for such activities.…
One of the reasons of why the dollar bill represents why the Indian Removal Act was enforced was because of Manifest Destiny. Manifest Destiny was nothing more than an idea or belief that was popular in the 19th century. This belief was surrounded by Christianity. The belief was that the US was chosen by God to have land/resources. This relates to the dollar bill because it says: “In God We Trust”. The Native Tribes were being swept away and the white settlers believed that it was right for them to be swept away because they didn't believe in god. Their decisions were easier to justify because God was on their side. Manifest destiny was religion plus nationality. If you take your religion and say that you are chosen by god, it turns religion…
As the case of Excello Telecommunications is reviewed it can be seen that the CFO was facing financial difficulties due to increased competition. In 2010 the earnings estimate was not going to be met and this would have affected the bonuses, stock options, and the share prices of the Excello stocks. After discovering a large sale that was pending until the shipment could be made for the following year the CFO asked the company controller to find a way to capitalize on the sale in the current year so that the budget shortfall could be met. The only way to accomplish the task was to work around the rules of accounting. The intent to find a way around the rules presents possible legal issues. This case can be evaluated by the Sarbanes-Oxley Act and the AICPA and we look at the financial reporting standards and ethics involved.…
Ethics plays a huge role in business as it keeps businesses and employees honest, promotes accuracy, and protects those who could otherwise be hurt by someone else’s scheming. In order to protect ethics, sometimes transparency is needed to help those tempted to commit fraudulent acts. The Bible states, “Better is the poor that walketh in his integrity, than he that is perverse in his lips, and is a fool” (Proverbs 19:1). The…
References: Accounting Fraud at WorldCom. Retrieved October 21, 2008 from Harvard Business Online Website: https://harvardbusinessonline.hbsp.harvard.edu/b01/en/courseplanning/student/student_course_detail.jhtml?courseId=c23431…
The documentary “ Living on a Dollar a Day” was created, filmed , and produced by two young Economic Major college students, with the help of two film ethnographers. They set out to Guatemala to see just how difficult living in poverty on a dollar a day would be. They spent eight weeks documenting how difficult life actually was and what they could do to try to help out.( Ingrasci, Temple,2013)…
The purpose of this paper is to identify potential financial statement fraud schemes at Apollo Shoes and describe the type of evidence to look for to determine whether fraud is occurring, and to finally outline how the substantive procedures previously identified will be used to analyze potential schemes.…
When management feels there is an immense amount of pressure for revenues to be greater than some pervious amounts it is possible for fictitious revenue schemes to take place. For instance; the creation of unreal and real customers takes place. This is done in order to record revenue by way services or goods that have never happened or were never actually sold. Management creates phony invoices; increase price, or quantity, which then requires a reversal of the sale using a credit in the next period.…
During the fiscal years 2006-2009, Tyco Inc. was found to be involved in several illicit payment schemes. The company filed misstated financial statements with the SEC, failed to place and maintain efficient internal controls, paid false commissions and payments through a third party, and violated anti-bribery provisions set by the FCPA. By using Tyco’s international business, illegal acts were easily hidden within the financial statements and the company was able to earn $10.5 million in profits by employees’ commissions and promises with third party contracts.…
When a company suffers from fraud from any source, the consumers are the ones that suffer. Companies make up the difference by raising costs, which ultimately means higher prices for consumers. Employees suffer because their hours, job, and their pay may be less. Investors and employees may find themselves unable to pay off loans, and credit becomes harder to obtain (McGrath, J.,…
The purpose of this report is to investigate and discuss the accounting fraud that occurred at WorldCom in order to recommend improved strategies to Berkshire Hathaway’s management for avoiding investments in companies with fraudulent financials. Accounting fraud is a crime committed by high level employees at an organization to manipulate the organization’s financial statements and intentionally disguise company performance. The fraud is committed without the knowledge of owners (shareholders and investors) to benefit the individuals perpetrating or committing the fraud and results in a negative impact on the owners.…