It became such a big snow ball of lies that it took down one of the biggest corporations in American history. Andrew Fastow made the company look it was in a great position beside the fact that Enron and its subsidiaries were loosing money left and right. His idea was to hide the assets that were creating losses by creating the Special Purpose Entities (SPE). The SPE were used to keep the assets off the books making the company look in a lot better shape than it
They showed false financial statements, inflating growth and profitability to increase WorldCom stock prices. The fraud was committed by overstating revenues by at least $ 958 million and understating line costs by over $ 7 billion. WorldCom’s longstanding auditor, Arthur Andersen, failed to recognize the fraud. This paper discusses, firstly, whether Andersen’sindependence was violated and if they performed the audit with professional skepticism and due care. Following the appropriateness of their audit procedures is discussed and lastly, recommendations towards controls that can address the risk of management override are presented.
The book Dumb Money, written by Daniel Gross describes the era of “Dumb Money” and even “Dumber Money” causing the credit bubble that occurred prior to the 2008 financial crisis. Gross explains that it wasn’t “skeezy money managers” that caused the recent financial tsunami, but rather Ph.D. economists, central bankers, CEO’s and investment bankers. Gross reveals that the four factors that precipitated the Dumb Money era were low decreasing interest rates, increasing asset prices (real estate in particular), plentiful borrowers, and a strong debt market. He explains that due to the “shadow banking system” American financial culture was too fixated on short-term gains rather than long-term gains and encouraged excessive borrowing, lending, and trading. Gross criticizes
1.a. Summary of the case identifying the key issues and its stakeholders Moody's, the oldest and more recently most profitable credit rating agency in the world, underwent strong criticisms for misjudging the inherent risks of complex, asset backed securities in an already flawed financial structure that inevitably helped fuel the 2008 global financial crisis. Instead of being arbiters of risk Moody's business model had over time adjusted itself to meet the needs of its market stakeholders; a colorful variety of hyper optimistic lenders, investors, bankers, issuers, governmental sponsored organizations, and Moody's stockholders and employees. Equally symptomatic to the defect financial structure were the influential non market stakeholders like the US government and its regulatory arms and oversight committees. Shorty after Moody's started rating asset based securities, especially subprime mortgages, they started defaulting and eventually were downgraded.
In December 2008, the SEC charged Bernard Madoff and his investment firm, Bernard Madoff investment Securitirs LLC, with securities fraud for the multi-billion dollar Ponzi scheme he perpetrated on advisory clients of his firm for many years. The SEC filed emergency motions to freeze assets and appoint a receiver, and worker to return as much money as possible to harmed investors. The Bernie Madoff documentary was one of the more interesting videos I have ever seen. While the Madoff controversy was a highly public topic, this documentary helped fill in the infamous story from start to end. At the start of Bernie Madoff career, he had a very successful market making business.
The strength of the economy encouraged Americans to take out more loans and buy more stocks, making them susceptible to future changes in the economy. The freedom caused financial markets to crash globally which helped power the Great Depression. Another example of lack of government intervention was the robber barons, a term referring to the wealthy and powerful businessmen in the 18th century. They were also known as “pure capitalists”, because they believed in an economic system that involved minimal interference from the government. Those working for robber barons were beaten and threatened, and the working conditions were terrible.
The accounting practices created a scandal in which the companies were able to hide information from investors. This allowed the stock prices to remain high even when the company was struggling. When the companies collapsed, investors became worried about the overall securities markets. The Sarbanes-Oxley act is a response to the corruption with the attempt to improve business accounting regulations. The act is considered the most extensive increase in regulations since the Security and Exchange Act of 1934.
401(K) has become ineffective because of the corruption of big business, the misunderstanding of and as a result a mishandling of the 401(K) accounts, and its correlating dependency on the market’s success. Making profit is important to people. Most of all, improving the bottom line is the primary objective for major companies. “For Robert Shively, learned that his employer, Occidental Petroleum Corporation, or also-known-as Oxy Pete,” wanted to forgo the guaranteed-employer pension plans for the less demanding 401(K) system where it is based on contributions from employee’s pay rather than from the employer’s profit. This forces the employee to save without any effort but, due to this, workers began to neglect the social security and entirely dropped the use of the original pension plan.
Matt LaFlamme Bus law 9am The Sarbanes–Oxley Act, also known as SOX was enacted July 30, 2002. SOX is administered by Securities and Exchange Commission, which sets time limits for compliance and publishes rules on requirements. SOX is not a business practice and does not regulate on how a business should store their records, it defines which records need to be stored and for how long they need to be stored. SOX was enacted due to the reaction of multiple major corporate and accounting scandals, which include Enron , Tyco international and WorldCom. These scandals cost investors billions of dollars when the share prices of affected companies collapsed, and shook the publics’ faith in the security markets.
AFTER A HUNDRED YEARS of attempting to come to grips with alleged monopolies, no one expected the 1980s and 1990s to become a rev olution in industrial organization and a boom for Wall Street's mergers and-acquisitions specialists. Yet American industry was on the verge of its greatest change since the days of Gould and Vanderbilt. To add some humor and sarcasm to the financial trendiness of the 1980s, an off-Broad way play with a distinctly Brandeisian tone went on nationwide tour. Other People's Money was a satire of all of the favorite corporate raider devices of the decade, including poison pills, shark repellents, and greenmail. Based upon past experience, the slowdown in economic growth and the ebbing of the conglomerate trend suggested that large corporations were