COSO Fraud Study 1. How big of a problem is fraudulent financial reporting? Fraudulent financial reporting not only misleads the financial statement users to make wrong decision but also have negative impacts on various aspects of companies. For example, companies could be involved in lawsuits and suffer huge profit loss or negative stock reaction. Based on the data, more frauds occurred in the recent 10 years than the last decade.
Introduction Autonomy, a British software maker was acquired by Hewlett-Packard in 2011 for $11.1 billion. Following the purchase, sales have dropped significantly, prompting HP to oust Mike Lynch, founder of Autonomy, and send their own auditing team to review its books. From the following months of investigation, HP has accused Autonomy of tampering with its books, inflating its sales before the deal. The accounting improprieties went undetected by outside accountants before the deal. The costs of the accounting issues cost HP approximately $5 billion dollars.
So bold and audacious was this fraud that it spawned a book, Faking It in America. ZZZZ Best, Barry’s legitimate carpet cleaning business, never made a profit and borrowed constantly. To support the loan requests, Barry created a fictitious business, purportedly engaged in restoring buildings damaged by fire and flood. The company also went public; and in short order, its stock price rose from 5 cents to $18 per share. Ultimately, the restoration “business” accounted for 80% of ZZZZ Best’s reported earnings, the only catch is that its revenues came from recorded receivables that were entirely fictitious.
They had very low debit and had a focus of simply expanding their growth by increasing their international sales. 2. What went wrong for Coleco? Late 1987 when they were projecting minimal losses Coleco took a larger than expected hit with the October 19th stock market crash which hurt the Christmas sales. This combined with the inadequate amount of working capital added to their woes.
Recently, Wal-Mart has been under scrutiny for bribery scandals in its largest foreign subsidiary, Wal-Mart de Mexico. In September of 2005, a senior lawyer for Wal-Mart received an e-mail from a former top executive notifying him that the company’s largest foreign subsidiary, Wal-Mart de Mexico, had planned out a multitude of bribery schemes to win market dominance. The bribes were paid to obtain permits or licenses to expedite the setting up of retail units throughout Mexico. In the exchange of e-mails that went on back-and-forth, the former executive was able to provide names, dates, and bribe amounts to the lawyer. Wal-Mart went forth with the allegations and immediately found a paper trail containing suspicious payments totaling more than $24 million.
Final Paper Candice Blair University of Maryland University College PRPA 601 Turnitin score: There are few betrayals worse than mishandling money that someone has entrusted to you. Imagine the damage control needed when institutions whose purpose is to manage others’ money, mishandles the finances of millions of people. In 2012, the financial world was shattered with the implosion of one of the world’s banking giants, JP Morgan Chase & Co. (JPM). Due to a complex trading portfolio that was dubbed the “London whale”, which amounted to over $6 billion in losses, JPM was accused of misleading its investors in order to boost profits, but asserted that they (JPM) were acting on the best information that they had at the time. A lengthy investigation and several hearings pressed JPM leaders on their trading practices.
In other countries their culture and language vary greatly from the American way (Palvia, S. C., Palvia, P., Weidong, X., & King, R. C. (2010)). Other issues include time differences and working conditions. Within a foreign country that is on the other side of the world, it is difficult to have a productive workforce that can work 24 hours a day, 7 days a week, to be on call during American business hours. These demands can lead to poor working conditions and a not so qualified workforce. To help solve some of these issues major corporations have also outsourced their management teams and most of their business operations, which in turn reduces their management and business operations here within the United States.
Due to the company’s weak controls, the accountants did not take the time to review each invoice or study the signatures that were most definitely forged in an unmistakable font immediately recognizable to the person who had been forged. According to the 2010 Global Survey, 42.1 percent of perpetrators were employees, accounting for most of the perpetrators of that year. It was a close first to the upper management who held second at 41 percent. They state that more than 80 percent of frauds are committed by individuals in six departments including accounting, operations, sales, upper management, customer service and purchasing. Miano was involved with the operation of the project therefore enabling him to the opportunity of such easy access to committing the actual crime (ACFE,
Soon each came to become a key management figure in the company. F. The Fraud * Pre-Recorded orders to boost revenues, failed to write off uncollectable receivables, increased inventory in-transit, ignoring discounts, failing to record expenses and liabilities. * By 1992, $130 million of bogus entries were recorded in the companies accounting records, which overstated profits by $80 million. * Accounting
Proposals were allocated to staff randomly. Income also made use of HP 3000 mainframes which were Filled-up application forms of clients were sent by agents through courier. Their very unreliable due to frequent breakdowns that resulted to downtime, decreased productivity. 3-)The software comprised three subsystems , and the new system was operational on a high availability platform .All aplications resided on two or more servers , each connected by two or more communication lines , all of which were load balanced . 4-) Income revamped its business continuity and disaster recovery plans.