Enron mainly dealt in the energy business, eventually becoming one of the world’s leading energy and communication companies with claimed revenues of $111 billion in 2000. At the end of 2001, their financial condition was reported to be sustained mostly by systematic and creatively planned accounting fraud, eventually causing the dissolution of the Arthur Andersen accounting firm. This scandal was mainly attributed to Enron creating offshore entities which were not subject to business taxes that raised the profitability of their business. The corporate officers led the deception and created the illusion that they were raking in revenues of billions of dollars when in reality, it was losses. Executives and insiders knew about these offshore accounts that were mainly used to hide losses with the investors completely left in the dark.
After a trial run, the technology that the firm helped develop became the NASDAQ . At one point, Madoff Securities was the largest buying- and-selling "market maker" at the NASDAQ. Madoff's firm, which is in the process of liquidation, was one of the top market maker businesses on Wall Street (the sixth-largest in 2008),often functioning as a "third-market" provider that bypassed "specialist" firms and directly executed orders over the counter from retail brokers. The firm also had an investment management and advisory division that is now the focus of the fraud investigation. - Securities fraud : Madoff was arrested by the Federal Bureau of Investigation (FBI) on December 11, 2008, on a criminal charge of securities fraud.
Legal and Ethical Issues of Financial Reporting Roberta Barker ETH/376 May 19, 2014 Sam Hinton Legal and Ethical Issues of Financial Reporting Case 7-4 Excello Telecommunications Excello Telecommunications has been a profitable enterprise for a number of years, but has faced a recent increase in competition for their products by overseas manufactures. Now for the first time in its history, it has become evident they will not be able to meet their earnings estimates, which is a concern to top management on how it will affect bonuses, stock options and share price of company stock. CFO Terry Reed discovers a December 20, 2010 $1.2 million transaction with the potential to solve the problem. This transaction would typically be recorded at time of shipment. Unfortunately in this case the customer Data Equipment Systems is unable to receive shipment until January 11, 2011 due to a lack of available warehouse space (Mintz & Morris, 2011).
What major changes occurred as a result of the accounting scandals at that time? The Sarbanes Oxley Act of 2002 (SOX) was created in response to the large corporate scandals, including Enron. SOX was engineered to set rules for compliance. The stringent sore rules were put in place ?to protect investors by astir(p) the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for early(a) purposes (SOX, 2002). The most fundamental reform of SOX was the Public Company write up Oversight Board (PCAOB), which was created to oversee auditors of public companies in orderliness to protect the interests of U.S. investors.
Identify and briefly describe the specific fraud risk factors present during the 2000 NextCard audit. How should these factors have affected the planning and execution of that engagement? There were many risk factors present during the 2000 NextCard audit: unusually rapid growth and profitability, significant related-party transactions, poor or worsening financial condition when management guarantees debt, and management uses aggressive accounting measures to boost stock price. NextCard, incorporated respectively demonstrated these risks as: extending $1 billion of credit to its customers with an average balance of $2000, executives sold-off large portions of their ownership interests in the company before the financial condition became apparent, in 1999 the company produced a loss of $77.2 billion followed by a $81.9 billion loss in 2000 and
He achieves this by clearly illustrating that 401(k) is vulnerable to many aspects. He gave readers factual data to explain how the 401(k) correlates with the stock market. Near the conclusion he give the reader possible solutions for solving this issue. He suggests that we should invest in a business that strictly caters to employee’s retirement funds. It would behave exactly like insurance agencies with the exception that when workers retire they would start receiving money on a monthly
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.
These scandals cost investors billions of dollars when the share prices of affected companies collapsed, and shook the publics’ faith in the security markets. When examining the SOX act you can see that since 2002 many things have changed in the past eight years. Corporate governance is one of many things that have changed; Public companies must now have a totally separate audit committee composed of entirely independent directors and must contain one financial expert. Security fraud now has much more extreme punishments for those who commit or conspire to commit fraud. Since the introduction of SOX auditors of public companies must keep documentation of an audit for seven years, destruction of any documentation or evidence that someone has committed fraud is now punishable by jail time and fine.
Lara Ramey Southern New Hampshire University OL 442 – Professor David Miller April 25, 2015 Final Paper: Data Security With technology taking over businesses and costs rising higher by the year, having a solid data security policy in place is an extremely beneficial and important part of protecting an organization. Sinrod (2010) discusses how financially damaging data breaches can be for an organization, with an average cost of $6.75 million per incident in 2009. Breaches can be expressed both in and out of the organization, with especially staggering statistics on employee theft. Dwyer (2014) states, “39 percent of data theft from businesses comes from company insiders. Even more troublesome, 59 percent of ex-employees admit they
The detrimental product was Paxil, designed to relieve depression, generated disastrous side effects such as addictive behavior and birth defects. This drug was marketed toward children, and this strategy caused a class-action lawsuit worth over $60 million. Another lawsuit occurred in 2010, when they paid over $2 billion to settle with Avandia. Then in 2011, GSK recorded a $3 billion charge to deal with litigation. These financial settlements were immense and a huge hit to the company, and directly impacted their product quality.