...{DC(-P[,"^q-' li Frauds of the Century BERNARD MADOFF worked as a lifeguard to eam enough money to start his own securities firm. Almost half a century later, the colossal Ponzi scheme into which it mutated has proved impossible to keep afloat unlike Mr Madoffs 55-foot fishing boat, "Bull,,. The $ I 7. I billion that Mr Madoff claimed to have under management earlier this year is all but gone. His alleged confession that the fraud could top $50 billion looks increasingly plausible:, ' clients have admitted to exposures amounting to more than half that. On December l6th the head of the Securities Investor Protection Corporation, which is recovering what it can for investors, said the multiple sets of accounts kept by the 70-year-old were in "complete disanay" and could take six months to sort out. It is hard to imagine a more apt end to Wall Street's worst year in decades. The known list of victims grows longer and more star-studded by the day. Among them are prominent billionaires, including Steven Spielberg; the owner of the New York Mets baseball team; Carl Shapiro, a nonagenarian clothing magnate who may have lost $545m; thousands of wealthy retirees; and a cluster of mostly Jewish charities, some of which face closure. Dozens of supposedly sophisticated financial firms were caughl out too,.including banks such as Santander and HSBC, and Fairfield Greenwich, an alternative-investment specialist that had funnelled no ...
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...The Fraud of the Century: The Case of Bernard Madoff 1. What are the ethical issues involved in the Madoff case? Not only is what Bernard Madoff did highly unethical but for his company to be able to pass the tax audition imposed question on the SEC internal system a farce. I guess Madoff bribed the auditors. I guess the saying money talks holds true for some. How people could morally falsify documents for money is just beyond comprehensible. To even take advantage of an innocent person is unfathomable. The ethical issues I saw were a manipulation of cash flow to make his company appear to be more valuable than it truly was and his company’s financial reports were never made public during the scheme. How is it that no one ever questioned that and he got away with it? Again, all I can think of is bribery. Makes you sort of wonder how people supposed to be dealing with the law can just break it without question and get away with it. 2. Do you believe that Bernard Madoff worked alone, or do you think he had help in creating and sustaining his Ponzi scheme? Would this represent a conflict of interest? I feel Bernanrd Madoff had help with the Ponzi scheme. Even the smartest of people need help. I don’t feel a scheme like this could be concocted or carried out alone. For no one in his company over the course of the thirty years in which he carried this scheme out to have even picked up on it is just shocking to me. Not even the accountant or auditors with respect to the financial...
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...Chaos in the Caribbean Strayer University Forensic Accounting and Fraud Examination ACC 571 Dr. Timothy Brown ------------------------------------------------- 1. Evaluate Avey’s role as an expert witness for the Jamaican government. Avey and his firm were hired by the Jamaican government starting in the early in the 90s to investigate accusations of fraud and mismanagement and prepare reports outlining his findings starting with the Blaise Merchant Bank and Trust Co which spread to two similar but larger cases involving Century National Bank and its related financial entities and Eagle Merchant Bank. As an expert witness, Avey was hired by the Jamaican government to provide forensic investigation and audit support. He utilized specialized investigative skills in carrying out an inquiry conducted in such a manner that the outcome would be applicable to a court of law. In addition he examined evidence regarding assertions to determine its correspondence to established criteria carried out in a manner suitable to the court. Avey conducted his investigation grounded in sound forensic accounting principles where he quickly discovered self dealing in the Blaise Case where money was lent from one Blaise financial entity to companies controlled by its principal shareholders. In the Century Case, dishonesty was the main cause of the problems where the use of depositors’ funds to acquire such assets as real estate (which had also been the case with Blaise) for the...
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...Forensic Accounting Name Institutional Affiliation Fraud committed on behalf of an organization vs. fraud committed against an organization Fraud commuted on behalf of the organization entails a section of the organization’s employees especially the senior management engaging in activities that are meant to benefit the company but in reality cause serious issue to the larger society the group is supposed to serve. An example of these types of frauds is false bidding scheme that refers to situations that a firm pretends to have followed the bidding system although practically the bidding did not take place. One party is allocated the bid before they are received for evaluation although other parties are invited to offer and as such, it is a form of collusion between a contractor and the party giving the contract (Albrecht, Howe & Romney, 1984). Another example of fraud committed on behalf of the organization is the financial date restatement by the company’s finance department in conjunction with the senior management. While it is usually an acceptance of the accounting errors on the part of the company’s financial team, it can result in financial mistakes in the application of the accounting principles, mathematical errors and the misuse of the financial acts (Ferris, 2013). Another example is in the case of an audit examination of the US banking institutions that according to research by the Bank Secrecy Act, most of these institutions are not performing well but the...
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...be definitively and objectively established? The latter were two questions to approach some explanation of the theories of white collar crime and the criminological concept of the offenders in this sector. There are the sociological, biogenetic, psychological, and sociogenic explanation to white collar criminology and crime. The most basic theory of criminality states that criminals are different in some fundamental way from non-criminals. Then the nature of the difference must be identified. On a Sociological level the propensity to commit crimes, is shown to vary among various segments of the population or among different organization. The biogenetic explanation of criminality became especially influential in the nineteenth century. This states that criminals are inherently different from other people, even down to their appearance. This explanation was promoted by: The Austrian anatomist Franz Joseph Gall’s phrenology and Italian criminologist Cesare Lombroso’s concept of the “born criminal.” The significant of this notion is that it has persisted in the public imagination long after it was discredited by criminologists. Biogenetic...
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...Sarbanes Oxley Act 2002 The financial scandals of Enron, WorldCom and some other large companies in the beginning of this century, encouraged Congress to introduce the Sarbanes Oxley Act (SOX) 2002 in order to fight the escalating commitment of financial statement fraud. The main objective of this legislation was to recover the investors’ trust in the American stock market, and enhancing the prevention and detection of corporate fraud. In this thesis I would like to analyze the effectiveness of SOX 2002 in preventing financial statement fraud, corporate governance characteristics and effective internal control systems. Finally, the results of the study showed that SOX has not been able to prevent or reduce the likelihood of financial statement fraud. Introduction Since the last 20 years the global economy has been facing a dramatic flow of accounting scandals committed by CEOs and managers of prestigious entities known all around the world. One of the most notorious fraud cases in the last decade was that of Enron where debts were hidden, revenues were inflated and the presence of corruption was uncovered. Other similar cases that also battered the accounting world were those of Adelphia Communications and Global, WorldCom, Parmalat, AIG and Tyco International. Most of these scandals took place during the latter years of the previous century and in the beginning of 2000. These actions obviously triggered a high level of uncertainty regarding the accuracy and reliability...
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...history of auditing The evolution of auditing is a complicated history that has always been changing through historical events. Auditing always changed to meet the needs of the business environment of that day. Auditing has been around since the beginning of human civilization, focusing mainly, at first, on finding fraud. As the United States grew, the business world grew, and auditing began to play more important roles. In the late 1800’s and early 1900’s, people began to invest money into large corporations. The Stock Market crash of 1929 and various scandals made auditors realize that their roles in society were very important. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. The auditors’ job became more difficult as the accounting principles changed, and became easier with the use of internal controls. These controls introduced the need for testing; not an in-depth detailed audit. Auditing jobs would have to change to meet the changing business world. The invention of computers impacted the auditors’ world by making their job at times easier and at times making their job more difficult. Finally, the auditors’ job of certifying and testing companies’ financial statements is the backbone of the business world. Introduction Auditing has been the backbone of the complicated business world and has always changed with the times. As the business world grew strong, auditors’...
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...Practices and Ethics In 2012 GlaxoSmithKline (GSK) paid $300 million in fines for incorrect pricing (The United States Department of Justice, 2012). Five executives of National Century Financial Enterprises were convicted of conspiracy to commit securities and wire fraud (New York Times, 2008). These companies are just two examples of financial fraud and lack of financial ethics in health care organizations. These two stories reinforce the importance of employing ethical and trustworthy financial managers and staff. Financial management is a complicated and detailed job. Generally accepted account principles (GAAP) have three sets of rules, and include 10 basic guidelines and principles (Averkamp, 2014). Planning, controlling, organizing and directing, and decision making are the primary elements of financial management (Baker & Baker, 2011). The first of the four elements in financial management is planning. In this phase, the manager identifies the steps that need to be taken to complete the organizations objectives (Baker & Baker, 2011). How much money will be needed to maintain operations in the next year? Things like medical supplies, equipment, additional employees, and more need to be considered in the planning process. The planning stage will encompass the next business year as well as the years to follow. Many organizations will want a five to 10 year plan or longer. The next element is controlling, and this is usually carried out by the controller or comptroller...
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...natural gas. They did this by purchasing large amounts of short-term natural gas contracts from suppliers and subsequently contracting long-term agreements with sellers. This, in effect, eased volatility and allowed consumers to obtain constant or steady prices for natural gas. Though it began as a trading company, Enron diversified by buying many different types of assets, both energy and other consumer goods. At its peak, Enron was worth $60 billion dollars and had a stock price of $90 per share. In fact, Fortune Magazine named Enron “The Most Innovative Company” for six straight years. Enron’s downfall began with poor and misleading financial reporting which led to the discovery of fraudulent activity by Enron’s officers. The fraud Enron perpetrated center around two acts: (1) inaccurately reporting trading revenue, and (2) unloading debt obligations on special purpose entities. Proper revenue recognition for a trading company such as Enron would have been to recognize revenue for the trading fee only. Instead, Enron recognized the entire price or value of the trade as revenue. This inflated Enron’s...
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...Case Study 1 – And the Fraud Continues Heidi Janis Casazza Strayer University ACC/571 Dr. Timothy Franklin Deleanor Brown January 27, 2013 Case Study 1 – And the Fraud Continues Since the turn of the century, many financial scandals have been discovered, such as MCI Communications Corporation (MCI). Financial scandals can be minimized by the use of effective internal controls. According to Chao and Foote, effective internal controls reasonably prevent material misstatements in financial reporting and fraud while weak internal controls have the opposite effect (2012). Extensive research about the MCI’s financial scandal has provided proof that Chao and Foote’s analogy of internal controls is correct. Ultimately, the problems MCI had were caused by a weakness in internal controls, which causes MCI to be a prime example of how weak internal controls can be disastrous and lead to the bankruptcy of a company. The Situation That Led to MCI’s Downfall MCI Communications Corporation (MCI) was a communication company that primarily dealt with resellers, which means MCI would sell or lease time to other communication carriers who in turn resold the time to other businesses and consumers. According to Lyon and Tocco (2007), MCI’s revenue grew from about $240 million to about $650 million a month in account receivables. In addition, the growth in revenue caused the bad debt percentage to increase significantly in 1995 along with a significant increase in accounts receivable...
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...FORENSIC AUDITING As stated by Gordon Brown, the former Prime Mister of the United Kingdom, “what the use of fingerprints was to the 19th century and DNA analysis was to the 20th century, forensic accounting will be to the 21st century”. When people first see the word “forensic”, they naturally categorize it into a science-related field. According to Webster’s Dictionary, the term “forensic” is defined as “belonging to, used in, or suitable to courts of judicature or to public discussions and debate”. Therefore, forensic accounting is generally defined as relating and applying financial facts to legal problems (Singleton and Singleton 12). Forensic accounting consists of a combination of the techniques that are used in accounting, auditing, and investigative work. The focus of this paper is on the concept of forensic auditing; however, forensic auditing cannot be fully understood without incorporating all of the facts about forensic accounting. Most situations that involve forensic auditing will deal with proposed fraudulent activities, but there are some cases that may deal with non-fraudulent activities, such as settlements of monetary disputes (“Student Accountant”). Throughout this paper, we will discuss, in detail, the profession of forensic auditing and forensic accounting in relation to fraudulent activities. What is Forensic Auditing? Forensic auditing and financial auditing are not related in any way; rather, they have their own distinct objectives that are set...
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...An Analysis of the Hypocrisy of Patriarchal Roman Catholic Values in Tartuffe by Moliere This drama analysis will analyze the scene in which Tartuffe is attempting to convince Orgon of his credentials as a Roman Catholic priest. Orgon’s status as a wealthy member of the community continually averts the suggests from Dorine (his servant) and Mariane (his daughter that Tartuffe might be a fraud posing as a priest. In this scene, Orgon has just met Tartuffe, but Dorine has become suspicious of his credentials as a Roman Catholic priest. During this time, Dorine warns Orgon that she attempting to “save his soul” from Tartuffe, since he represents a fraud and rake posing as a member of the clergy. However, Orgon refuses to listen to a woman, especially...
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...following questions (1-9) with a short answer – no more than a paragraph. 1. What was the significant of the McKesson & Robbins case? It redefined some auditing standards. Prior to this case, auditors had no responsibility to verify inventory. As a result of the McKesson & Robbins case, it was determined that auditors should extend verification beyond “the books” to establish the actual existence of the assets and liabilities shown on the balance sheet. Confirmation of receivables and observation of physical inventory became mandatory audit procedures. 2. Briefly describe an American audit at the turn of the 19th to the 20th century. Bookkeeping was only briefly reviewed while the balance sheet and verification of current assets/liabilities was the main focus. The audits at the turn of the 19th – 20th century were basically a certification of balance sheets to be used by bankers to determine the credit worthiness of applicants. 3. Discuss how and why a CPA firm might screen potential audit clients. Before accepting new clients, the CPA firm should investigate the potential clients to determine acceptability (integrity, knowledge of client industry, other business risks). This can be done by: * Communication w/ predecessor auditor * Gathering info from local attorneys, banks, other businesses * Talk to clients, customers, vendors * Interview management/employees * Hire professional investigator 4. List and discuss management...
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...Was Shakespeare a fraud? This question has ringed in the hearts of scholars for nearly 200 years. It was first introduced in the satirical The Errors of Modern Infidelity, written in 1848 by Samuel M. Schmucker. The question, obviously, wasn’t meant to be taken so seriously, but 169 years later, here I am writing this paper about the conspiracy equivalent of a European JFK assassination. The current beliefs go as following, Shakespeare had another author who was another current literary genius, the author that wrote Shakespeare’s claimed works didn’t want to be known, or Shakespeare was his own author. One of the most suggested suspected authors was philosopher Sir Francis Bacon. Eight years after Schmucker’s original manifesto, a girl named Delia Bacon made the claim, “Shakespeare's plays were written, in large part at least, by her namesake Francis Bacon.” However, “After an abortive attempt to dig up Shakespeare's grave, she suffered a complete breakdown; she was committed to a mental hospital and died in 1859.” His popularity dropped for a decent while until “By the mid-19th century he was attracting massive support. But, by the turn of the 20th century, though, Bacon's star as an...
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...Vaccines are designed to produce immunity. Viruses in the vaccine cannot reproduce itself or cause diseases because they are made by killing or weakening them. Vaccines are given from the time of infancy. It helps in protecting the body against diseases in the future. Autism Spectrum Disorder, by definition, occurs before age 3 (Miller et al., 2009). It was during the 20th century, it was said that ASD occurred due to the ingredients in the vaccination given to the children. Although, more research and studies have changed the conversation about the effects of vaccines on autism to be more positive based on the history of vaccines, the ingredients in it such as thimerosal, and Wakefield’s fraud study. Starting by talking about the history...
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