advise LBJ Company of the strengths and weakness of their current internal controls. All weakness that are discussed include a recommendation to improve the internal controls of LBJ Company. II. Sarbens Oaxley Following the fall of Enron and Worldcom due to corrupt account practices, the United States implemented the Sarbanes Oaxley Act in 2002. Sarbanes Oxley, also known as SOX, is intended to protect investors from fraudulent accounting activities (SOURCE). LBJ Company will need to implement
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The concept of corporate governance has attracted considerable attention, domestically and internationally, in recent years. Following a number of high profile corporate collapses, such as HIH insurance and One.Tel in Australia, and Enron and WorldCom in the United States (US), a number of regulatory changes aimed at improving corporate governance have been implemented. The corporate world is facing the notion of Corporate Social Responsibility (CSR) wherever it turns these days. On a
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necessary Boreham, (2001). Another reason all business students should have some background in accounting is because in recent years, people in the business world have been held more accountable for their financial practices. Since the Enron and WorldCom crisis, when independent auditor Arthur Anderson failed to report illegal accounting practices, the SEC has been monitoring public corporations more closely. Thus, companies require some basic knowledge of accounting to avoid any future misstatements
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models and unethical practices, including a modified balance sheet so that it portrayed a more favorable depiction of its performance. 3. What was the prime motivation behind the decisions of Arthur Andersen’s audit partners on the Enron, WorldCom, Waste Management, and Sunbeam audits: the public interest or something else? Cite examples that reveal this motivation. It sure seems to me that at least in the Enron case, if Andersen’s employees destroyed documents as discussed, they were certainly
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the rise and fall of telecoms may indeed qualify as the largest bubble in history." Companies caught up in the telecommunications industry were forced to take huge debt write-offs and even resorted to fraudulent accounting tricks as displayed by WorldCom (Economist). Being involved in the manufacturing segment of the telecom market, one can witness first hand the results of the crash, including massive layoffs, hostile corporate take-over, and enormous company debt. Many top managers and front-line
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Worldcom 1.What are the pressures that lead executives and managers to “cook the books ” * Pressures from investors ……they want to see that the company/business is growing * Attract new investors ….for the business to grow * Personal reasons …greed and wanting more * Pressure form the big boss * Brand of the company … the business has been known to be a big brang * Slow/decline in the industry 1. What is the boundary between earning management and fraudulent reporting
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(Peter, pg 12). Maximizing shareholders’ wealth is just not enough. The author of the article is absolutely correct in stating that it leads to many unethical practices as we see in the case of the unethical conducts of big companies such Enron and WorldCom. Top executives’ compensations are tied into stock options; therefore, they have more incentives to manipulate financial reports. Developing corporate culture of ethical behavior would greatly benefit society. The public expectation for businesses
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beyond all limits....In every company we have found forgeries and falsifications of all sorts. But in this case we are really beyond the limits of the imagination." Parmalat Finanziara, the Italian dairy and food giant, is fast joining Enron and WorldCom as a household name for corporate scandal. The alleged financial fraud at Parmalat spans more than a decade and involves sums whose estimates have ballooned from EUR 4 billion to more than EUR 8 billion. Founder, chairman, and chief executive Calisto
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outlining his or her opinion regarding the quality of information contained in a company's financial reports and records. The subject of accountant independence became an important issue in the wake of the demise of such corporate giants as Enron and WorldCom in the early 2000's. (http://www.investopedia.com/terms/a/accountantsopinion.asp) There are several other ways exist by which companies can influence the timing or the magnitude of reported free cash flows. Increasing the use of capital lease
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financial markets. And since the ‘garbage in, garbage out’ principle also prevails in financial markets, public trust in the functioning of financial markets has declined as a result of major financial reporting scandals involving Enron, Tyco, WorldCom, Parmalat and others. Also, massive overvaluations of equity that occurred in the second half of the 1990s and in the early 2000s have been singled out as being caused by misinformation and manipulation of financial results ( Jensen, 2002). More
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