can they ever be justified? This case study will present examples of companies who have used inappropriate accounting practices, the results of their deceptions and the government's plan to avoid future incidents. Did banks play role in Enron scandal? By Edward Iwata Banks face accusations in Enron case By Edward Iwata Banks defend e-mail about Enron By Edward Iwata WorldCom finds accounting fraud By Andrew Backover, Thor Vladmanis, Matt Kranz and Michelle Kessler Former controller
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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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9-104-071 REV: SEPTEMBER 14, 2007 ROBERT S. KAPLAN DAVID KIRON Accounting Fraud at WorldCom WorldCom could not have failed as a result of the actions of a limited number of individuals. Rather, there was a broad breakdown of the system of internal controls, corporate governance and individual responsibility, all of which worked together to create a culture in which few persons took responsibility until it was too late. — Richard Thornburgh, former U.S. attorney general1 On July
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First of all, line costs are the amounts that WorldCom paid other companies to be able to use their communication networks for their customers and it included access fees and transport charges for messages. The line costs are an expense and instead of reporting them as an expense at the time, they chose to hold off on paying them and adding them in as an expense so that it would look as though WorldCom was earning more than they really were. The first solution should have been to relook at the
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be the most significant change to the federal securities laws in the U.S. since the New Deal. The Sarbanes-Oxley Act of 2002 The Act & Impact The Sarbanes-Oxley Act of 2002 was signed into law following the wake of corporate financial scandals. Many large companies such as Enron, WorldCom, and Arthur Anderson were affected. The Act provides a solid set of government rules that are aimed to discourage and punish corporate and accounting fraud, as well as corruption. SOX is designed to
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Very few American’s over the age of 20 do not know about Watergate. They have seen the plots in movies, history books, TV shows, and Made for TV movies. Some of the media plots are real and some not so much. Contrary to popular belief “Forest Gump” was not the person to crack open Watergate [ (Groom, 1994) ]. That honor goes to a simple security guard at the Watergate Complex, Frank Wills [ (AHC, 2012) ]. Mr. Willis was making his rounds when he became aware of tape covering the locks on the
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Olympus cameras began business in 1919 as Takachiho Seisakusho, a thermometer and microscope manufacturing company in Tokyo. It was renamed Takachiho Optical Co. in 1942 and later Olympus Optical Co in 1949, taking its name from its trademark logo, and reflecting the fact that optical products had become the core of company. Today, Olympus’ key business segments include medical imaging equipment, consumer electronics, industrial imaging equipment and scientific devices, including microscopes. Olympus’
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Nonbanks can follow identical strategies, which is what Enron did in the 1990s when it lobbied its accounts and the government to permit it to mark to market its contracts for the future supply of energy and Internet services to market.- C. William Thomas, The Rise and Fall of Enron: When a Company Looks Too Good to be True, it Usually is, J. ACCT., Apr. 2002, available at http://www.journalofaccountancy.com/Issues/2002/Apr/ TheRiseAndFallOfEnron.htm That change in accounting convention let Enron
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AVOIDING INVESTMENTS IN FRAUDULENT COMPANIES: THE WORLDCOM FRAUD Introduction 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
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Accounting fraud case Halliburton, one of the world's largest providers of products and services in the oil and gas industries, had several lawsuits brought against them and its former CEO, Vice President Dick Cheney. The allegations claim that Halliburton illegally overstated its revenues in order to hide losses the company had experienced because of under estimating costs for construction projects, and a downturn in the oil industry. The claim also states that the company violated U.S. securities
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