Their business included some long term investment and no short term returns to the company. Enron’s auditor was also accused of conducting business in an unethical manner in his attempt to retain the loyalty of Enron executives. At that time laws and SEC regulations allowed firms like Arthur Andersen to provide consulting services to a company and then turn around and provide the audited report about the financial results of these consulting activities, therefore making an “independent audit” by Arthur Andersen independent in name only. The Accounting Scandal It was revealed that it’s reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud, known as the "Enron scandal". The accounting techniques used to influence Enron’s financial statements were a combination of many different complex tactics.
Erstwhile his performance was very good till the new system of performance evaluation came into vogue. Frits Seegers, President of Citibank, California and other top management decided to introduce non-financial statistics for each branch in the performance evaluation, since evaluating only financial statistics and neglecting some of the keys non-financial statistics items in the performance evaluation such as customer satisfaction rating in the performance evaluation may lead to deterioration of bank’s performance in the long run. Hence the new performance appraisal system came into vogue since 1996 incorporating customer satisfaction rating as one of the elements determining the performance of a branch manager in Citibank. As a result of this, James McGaran's performance appraisal which usually exceeded expectations year after year had suffered in the rating of costumer satisfaction ratings which was introduced in the new performance scorecard that measured non-financial statistics for each branch. On careful perusal of the case, some of the following interesting observations were
Case Study 1 Midsouth Chamber of Commerce (A): The Role of the Operating Manager in Information Systems Introduction In order to increase efficiency and productivity of the Midsouth Chamber of Commerce (MSCC), Leon Lassiter, Vice President of Marketing, decides that MSCC could benefit from a systems and software upgrade for each division. However, Mr. Lassiter’s effort to accomplish this failed as additional steps were not taken in order to ensure a smooth and seamless transition. Background Leon Lassiter, Vice President of Marketing for the Midsouth Chamber of Commerce (MSCC), conducted an assessment of each division within the organization. His findings concluded that information systems were limited in capability and lacking in operational capacity to better support its members. Mr. Lassiter realized that new information systems for MSCC would have to be eventually implemented.
In the wake of the recent financial crisis, the accounting profession has endured much criticism. The purpose of this essay is twofold. First, I will discuss the role of accounting in the crisis. To do this, I will analyse two principal allegations against the discipline in relation to the crisis; namely the issue surrounding fair value (mark-to-market) accounting, and the issue of the over-complexity of accounting rules and regulations. I conclude that although the abuse of the profession by investment institutions aggravated the financial crisis, accounting cannot be said to be a root cause.
Materiality is defined by the FASB as an omission that would affect a normal person by a misstatement such as using earnings management to skew the true earnings or revenue. This calls in to play the unethical behavior that earnings management places on the public (violating AICPA Code of Professional Ethics). SOX further required management and accountants to be cognizant of the material errors that financial misstatement and false reporting could have from an ethical standpoint. It holds them accountable for all financial reporting from their company. This includes criminally and financial accountability.
Unethical professional values were symptoms of systemic problems for Enron. “Enron’s systems of oversight, ethical disclosure, and corporate accountability were flawed leading to the demise of Enron” (Schuler, 2009, para. 2). In fact, in 1999 Enron directors waived the company’s code of ethics allowing the CFO, Andrew Fastow, to run an investment partnership that traded with Enron. Enron not only committed financial fraud, but it has been alleged that bribes
Fillmore had inherited an undeniable success story. Research Associate Inna Francis prepared this case under the supervision of Professor Kamran Kashani as a basis for class discussion rather than to illustrate either effective or ineffective handling of a business situation. Certain data and financial information have been disguised. This case won the 2011 ecch Case Award in the category Marketing. Yet he was not complacent.
(INTRO) One of key accounting activities this WorldCom case points out is how WorldCom capitalized leased lines which brought little or no value to the organization, but were accounted as capitalized assets, and the impact this can have on external users. “To maintain and broaden public confidence, members should perform all responsibilities with highest sense of integrity.” (AICPA.com) By capitalizing the costs of these leased lines instead of it would have shown a significantly lower net value of the company. It would have negatively affected cash flows and all the ratios. This activity certainly discredits the profession. It does not offer the fullest disclosure, objectivity, and transparency.
Ethicality of Accounting Activities While reading Cynthia Cooper’s account of what led to the WorldCom case our team discovered that it was not one person’s fault. Accounting issues may begin from the top, but it takes the rest of the accounting team to continue to contribute to the fraud. Our team learned that because the CFO, Scott Sullivan, of WorldCom created a prepaid capacity account that seemed viable within the capital expenditures to the rest of the employees it led to a scandal within the company. This scandal involved many people from Cynthia Cooper and Glyn Smith, the determined internal auditors, to Betty Vinson and Troy Normand, members of the accounting department staff (Mintz & Morris, 2011). One of the key members of this case is Scott Sullivan the Chief Financial Officer of WorldCom.
The purpose of the balance sheet is to report a company's financial position on a particular day at the end of a period. The balance sheet presents assets, liabilities, and shareholders' equity in an organized way. “An important limitation of the balance sheet is that it does not portray the market value of the entity as a going concern, nor its liquidation value (Spiceland, 2011).” For example, assets such as land and buildings are listed at their historical costs instead of their fair values. Some company resources, such as trained employees, management, and reputation, are not listed as assets. Also, many items listed on the balance sheet rely on estimates rather than determinable amounts.