Andersen shunted aside accountants who failed to adapt to the firm's new direction. In their place, Andersen promoted a slicker breed who could turn modestly profitable auditing assignments into consulting gold mines. Repeatedly, Andersen rewarded those involved with the firm's most troubled clients, while guardians of the company's legacy were shown the door. The quiet dilution of standards and the rise of auditor-salesmen at Andersen are central to the scandals that have cost investors billions of dollars. Even though the leaders contended that conflicts between its auditing and consulting missions had no impact on the quality of its work but actually they do.
The article revealed that KKD booked the purchase cost as an intangible asset and failed to properly account for amortization expenses. Typically, the accounting treatment for reacquired franchise rights is to amortize the value of the acquisition over its legal life. The aggressive accounting practices of the company triggered the U.S. Securities and Exchange Commission (SEC) to investigate KDD in January of 2005. KKD’s Board of Directors decided to restate the financial statement to correct previous errors. However, the failure to provide the new financial statement on time damaged the reputation of the company even further.
Their bankruptcies became inevitable as the Securities and Exchange Commission (SEC) and financial analysts began to see the signs of irregularities among numerous companies. When the SEC ordered the restatement of their financial reports in accordance with the GAAP rules, it turned out that these companies were mostly founded by inflated revenues and negative financial conditions. Short after, companies reputations and financial credibility began break like bubbles, in the wake of the ensuing investigations. The result of these action caused investors once again lost their trust and confidence in America’s publicly traded companies, which eventually led to more bankruptcies. As a result, multitudes became jobless, and the trend went from bad to worse throughout the decade.
After reviewing Harnischfeger, we believe that at the time of the case it would be a risky investment. Looking in its past history of declining stock prices of a loss $7.65 per share in 1982 and 3.42 in 1983 we can see the natural economic trend of an expansion in the 70’s and contractions in the past years. Harnischfeger had several problems leading to a decline of sales in the 1980’s. They relied on debt to provide for the expansion in the 70’s, but they could not foresee declining sales and high interest payments that led to poor profit performance ($77 million). With this loss Harnischfeger defaulted on certain covenants on its loans.
I. Introduction and Comment * The Duplan Reorganization Plan and Proposed Compromise Settlement The reorganization plan of Duplan Corporation estimated its balance of cash at $27.1 million and stock at $27.2 million. The total $54.3 million were distributed to its creditors that included banks, trade creditors, note holders, debentures holders as well as some small claimers. Since the assets were less than $69 million of allowable debt, the original equity owners will be wiped out and there were some controversies among creditors regarding to distribution of cash and stock. In our opinion, the reorganization plan of Duplan Corporation underestimated its assets and distributed available cash and new stocks unfairly.
2. Why did this scandal happen? There are many causes of the Enron collapse. Among them are the conflict of interest between the two roles played by Arthur Andersen, as auditor but also as consultant to Enron; the lack of attention shown by members of the Enron board of directors to the off-books financial entities with which Enron did business; and the lack of truthfulness by management about the health of the company and its business operations. In some ways, the culture of Enron was the primary cause of the collapse.
Since the stock market burst and NextCard no longer had access to the debt and equity markets. The credit card customers proved to be extremely high risks and resulted in large credit losses for the business. Once the large class-action lawsuit was launched and SEC began investigating, Robert Trauger of E&Y the audit engagement partner for NextCard called Oliver Flanagan his top subordinate on the 2000 NextCard audit to request revision to the prior year audit workpapers. Robert and Olive altered the report, however, Mullen retained a diskette with original workpapers and Flanagan obtained the diskette. Olive informed Trauger that it was destroyed but instead it was given to federal authorities.
Lehman Brothers and its collapse was at the center of a political debate during the Financial Crisis which was based on theories of conspiracy, lessons being taught, and public pressure that was tied to political motives on the part of the Fed. There is no doubt that the downfall of investment bank Lehman Brothers was a major contributing factor to the Financial Crisis. There is however doubt regarding exactly why this financial institution was allowed to collapse and what specifically the ramifications were for the financial system as a whole. In the middle of March, 2008, the Federal government working with J. P. Morgan Chase bailed out Bear Sterns, however only several months later in September of the same year, Lehman Brothers was left to file for bankruptcy after the Federal government declined to rescue them. This inconsistency on the part of the government and the Federal Reserve contributed to the uncertainty which the Financial Crisis fostered.
RUNNING HEAD: AMERICAN AIRLINES American Airlines and US Airway’s Merger By Aveon Sims Strayer University BUS 508 Contemporary Business Professor Jean Fonkoua August 24, 2014 Abstract American Airlines has suffered tremendous profit losses over the last few years. The losses have been so great that the company filed Chapter 11 bankruptcy. The news for the Chapter 11 bankruptcy protection was a shock to many, considering the fact that they had enough money to operate and cover their losses through the following year. The merger indeed was a great decision on behalf of American Airlines. The merger itself was questionable.
Carlos Albizu University ECON521 – Economics of Organizational Architecture and Strategy Analyzing Managerial Decisions- Société Générale In January 2008, the French Bank Société Générale suffered a major financial loss due to derivative trading handled by Jerome Keirvel creating fictitious transactions manipulating data, computer systems and the trust that management had over him. A) Identify Keirvel’s opportunity costs and incentives that led to his actions and behavior. Jérôme Kiervel was apparently acting alone when he purchased future contracts, the underlying assets for which were stock indices. It appears that Mr. Keirvel’s activities were linked to an attempt to raise his bonus by securing high profits for Société Générale. He engaged in unauthorized trades totaling as much as €49.9 billion by creating losing trades intentionally so as to offset his early gains.