Waste Management fraud
Waste Management Accounting Fraud Case
Review the SEC’s case against Waste Management in order to answer the following questions:
What were the incentives for committing the fraud?
What was the relationship between management and the auditors? Why didn’t the auditors prevent the fraud?
What (specifically) accounting methods were used to fraudulently inflate Waste Management’s profits?
What accounting methods did they use to try to conceal part of the fraud?
What were the financial and social costs of the fraud and who did they affect?
What did this fraud share in common with that committed by GEC and what were the principal differences?
A The company wanted to meet pre determining earnings targets to portray it was growing annually so as to deceive present investors and potential investors.Also the company executives wanted to retain their executive positions in order to reap substantial perfrormance based bonuses linked to the company's annual growth and retirement benefits.
B The auditors were cordial and seemed to be in an advisory role to the company.Former employees of the auditing company held key roles in the management of the waste company.The auditors didn't prevent the fraud because their Audi fees were capped and they were enticed to special fees from a special consulting project which would generate revenue for the auditing firm.
C Non accrual methods were used in which current period expenses were improperly deferred or eliminated to inflate earnings.
Also there were repeated changes to depreciation estimates.The company capitalized cost and used irrational useful life for its assets.Use of Non GAAP methods by the company.
D Geographical entries were used in which expenses were moved from current income statements to incorrect income statement.Also netting which offset one time gains with current period expenses and prior period mis statements in order to make them disappear.
E Financial cost:There was a loss of 6 billion market value
Review the SEC’s case against Waste Management in order to answer the following questions:
What were the incentives for committing the fraud?
What was the relationship between management and the auditors? Why didn’t the auditors prevent the fraud?
What (specifically) accounting methods were used to fraudulently inflate Waste Management’s profits?
What accounting methods did they use to try to conceal part of the fraud?
What were the financial and social costs of the fraud and who did they affect?
What did this fraud share in common with that committed by GEC and what were the principal differences?
A The company wanted to meet pre determining earnings targets to portray it was growing annually so as to deceive present investors and potential investors.Also the company executives wanted to retain their executive positions in order to reap substantial perfrormance based bonuses linked to the company's annual growth and retirement benefits.
B The auditors were cordial and seemed to be in an advisory role to the company.Former employees of the auditing company held key roles in the management of the waste company.The auditors didn't prevent the fraud because their Audi fees were capped and they were enticed to special fees from a special consulting project which would generate revenue for the auditing firm.
C Non accrual methods were used in which current period expenses were improperly deferred or eliminated to inflate earnings.
Also there were repeated changes to depreciation estimates.The company capitalized cost and used irrational useful life for its assets.Use of Non GAAP methods by the company.
D Geographical entries were used in which expenses were moved from current income statements to incorrect income statement.Also netting which offset one time gains with current period expenses and prior period mis statements in order to make them disappear.
E Financial cost:There was a loss of 6 billion market value