In concern of the movement, not everyone is happy and Wall Street embraces deregulation, undoing many of the rules put in place in the wake of the Great Depression to limit banks’ riskiest investments. The limits on interstate banking are gone; down came the wall separating commercial and investment banks. Wall Street did not respect people; they had only themselves in mind how they could become richer and the common people poorer. Their virtues are in question, Wall Street should have a professional code of ethics these are the roles that are supposed to govern the conduct of members of their given profession. Which Wall Street did not have in place or this would have never happen.
In the case of “Cynthia Cooper and WorldCom”, the accounting activity taking place clearly violated the ACIPA Code of Professional Conduct. Accounting dishonesty is the key activity involved in this case. It was noted in this case, that these unethical practices had taken place in upper authority, even down to lower level employees. Early on in this case, accounting statements were supplied; which raised red flags. The accounting statements were capital spending schedules, which differed in spending amounts (Mintz & Morris, "Case 2-1 Cynthia Cooper and WorldCom," 2011).
Previously recorded expenses were reversed to overstate income. “Gross profit entries” were made to reduce COGS and A/P. Rite Aid was also guilty of undisclosed markdowns and creating vendor rebates to hide its “gross profit entries.” A litigation settlement was also prematurely recognized to boost revenues. Rite Aid had been capitalizing expenses for new sites for their stores. However, they did not write-off the expenses when they had a “dead deal” and did not build a new store.
One huge internal control concern with LJB Company is violation of the segregation of duties internal control principle. The accountant should not serve as Treasurer and Controller. The same employee should not be responsible for related activities and record keeping should be separate from physical custody of the asset. By having the accountant order, pay and receive supplies increases the risk for fraud because they handle related purchasing activities. They can easily use fraud to authorize payment for a false invoice.
Case one: Worldcom The main issue of worldcom collapse was an accounting fraud. Which means that the company’s accountants made some improper accounting entries to give a picture of a growing company with a reliable, steadily rising income. Worldcom was founded in Clinton, Mississipi in 1984 by nine investors. One of the investors was Bernard J who was asked to take control of a company in difficulties. His strategy was to expend through aggressive acquisitions.
Since the bank has permitted billions to be laundered, it is now faces penalties of billions of dollars. The senate is also accusing HSBC of overlooking signs and warnings that would have clogged the money laundering from place like Iran and Mexico. The senate report alleges that from 2005, the HSBC violated the Bank Secrecy Act and other anti-money laundering laws on a massive scale. Many of the issues is that the bank maintained high risk account affiliated with suspected Mexican drug cartels such as the Casa de Cambio which is a place in Mexico for money laundering. And large cash transactions connected to Iran and other international countries under the U.S. economic sanctions.
The income statement and the balance sheet can often be misleading to an investor as there are many ways to record the dispensing of an asset or other types of financial obligations (Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports, 2009). The cash flow statement contains three sections: the cash flows from operating activities, which shows how much money the business received from operating the business; the cash flows from investing activities, which shows the money the business has gained or loss from investing; and the cash flow from financing activities, which shows the money that was taken in or paid out to finance the different business activities. Using the cash flow statement allows an investor to see if a business is generating more money than is used to operate the business. If this is happening regularly, the business is considered healthy and should be a good
The lack of ethical leadership at Enron enabled a culture to develop among management that it was all about the money! While the desire for money, greed and power is not a new concept in corporations, Enron’s failure was not simply the result of a lack of ethical rules and legal guidelines and requirements. At Enron, leadership had created a culture that pushed the envelope, a culture that encouraged and rewarded risk taking, a culture that was fixated on the bottom line and not ethics. The central problem at Enron was not a lack of awareness, or a lack of moral reasoning, but rather the absence of moral leadership and the neglected development of a moral corporate culture. Ethical thinking and Critical thinking are an essential part of leadership.
After that, Madoff started to help his investors to manage their money. He used Ponzi scheme to cheat his clients by promising of consistent returns of 10 to 12 percent. Base on his trustworthy and reputation, he success to find billions of dollars from hundreds of investors. Basically, Madoff just took money from new investors and uses it to pay off the old investors. Why he can make it because lots of investors lack financial knowledge.
It establishes a fundamental systems and processes for presenting and detecting misconduct, for investigating and disciplining, and for recovery and continuous improvement (Ferrell, Fraedrich, & Ferrell, 2011). The corporate governance did not protect the stakeholders because there was embezzlements from some employees and greed from the executive leadership. There was a lot of turnover at the executive level which made the organization weaken and may not able to carry out its mission. Not having this process in place to detect when there was some unethical acts being taking place has caused a lot of turmoil for this no-profit agency. There was not process in place to follow for recovery for when a mistake was discovered or a problem was reported.