d. Read the complaint against the audit engagement partner, who served as the 2001 and 2002 engagement partner. What factors caused the audit firm to recognize Bally as a high risk audit client for 1996–2003? a.) You can read the press release in http://www.sec.gov/litigation/complaints/2008/comp20470.pdf According to the Commission's complaint, Bally fraudulently accounted for three types of revenue it received from its members: initiation fees, prepaid dues, and reactivation fees; additionally, Bally fraudulently accounted for its membership acquisition costs. 1.
This legislation was created as a result of numerous fraudulent corporate instances prior to 2002 which resulted in weakened US markets and little to no trust from investors. The general purpose of this legislation was to implement new rules in the accounting industry that hold higher level accounting personnel accountable in accounting schemes and regain the confidence of investors as it pertains to the US market in hopes that the market will strengthen as a result of the new rules (Bing, 2007). The Sarbanes-Oxley Act of 2002, which I may refer to as SOX moving forward, is made up of eleven titles and various sections within these titles (United States Code, Sarbanes-Oxley Act of 2002, 2002). Some of the titles and sections that are of importance to the fraud of Phar-Mar Inc., Waste
Protects investors. Sox was created to reduce statement fraud, after the fraud scandal by Enron and WorldCom. It was created to establish higher standards in companies accounting procedures. To make sure that the information provided in the financial statements is accurate. Also to be able to penalize the individuals responsible for the fraud and to provide protection to the individuals that provide information about fraud committed in the companies.
This also includes establishing a private-sector regulator to oversee the auditing profession to combat accounting fraud, and enhancing financial disclosures. Companies are under more pressure to comply with SEC and Sarbanes-Oxley Act after recent and growing concerns about their ethical behaviors. Role of Ethics and Compliance in the Financial Environment Starbuck’s role of Ethics and Compliance in the financial environment applies to the Chief Executive Officer (CEO), Chief Financial Officer (CFO), comptroller, and other financial leaders. The company’s code of ethics encompasses
Impact of Unethical Behavior Analysis Impact of Unethical Behavior Analysis With a rich history in financial scandals, organizations need to protect themselves against bad publicity. The scandals highlighted the need for legislation. “Congress passed the Sarbanes-Oxley Act (SOX) to provide greater protection against corporate and securities fraud for public companies, mandating stronger internal controls, independent audit committees, the creation of anonymous hotlines, and, importantly, the implementation of safeguards against retaliation.” (Bannon, Ford, & Meltzer, 2010). While the effectiveness of the legislation has been heavily debated, there are still opportunities for unethical behavior. Top executives of companies are hired to improve performance and the pressure to do so can lead them to take unethical action to ensure their success.
Red flags or signs, signals and significant circumstances of financial pyramids are described in the article “Recognizing and Responding to red Flags: The Stanford Ponzi scheme” by Antonie Warwick-Young Walsh and Albert D. Spalding, Jr from Wayne State University. The aim of this case study is to bring the attention of investors, managers, auditors and students of business departments how to recognize such red flags and how to respond to them. Specific skills and tactics that include financial auditing and forensic investigations are recommended by authors. Allen Stanford, the founder, owner and manager of the Stanford Financial Group, was arrested in June of 2009 and was sentenced 110 years in 2011 for investment fraud that involved $7-8 billion, the second largest one after Madoff with approximately $65 billion of fraud. The authors of this case study raise a question how it is possible to fool so many people and for such a long period of time, about 15 years, and nobody noticed that something was wrong, but even if noticed, why remained silent, “didn’t blow the whistle”.
Since monopoly caused unreasonable price hike, government must be able to exercise control or consumers and the economy will both be affected. In this paper, the Antitrust charges levied against Microsoft will be analyzed to determine whether the charges were valid, or Microsoft was merely acting aggressively as capitalistic businesses are required to act in order to excel. Antitrust Claims Faced by Microsoft When the federal government prevailed in its antitrust action against Microsoft, a wave of private antitrust suits against Microsoft in the US followed, including European Commission investigation. (Cohen, 2004). Microsoft was sued by nineteen individual states and the District of Columbia for allegedly using their monopolizing power to dominate the market through a series of exclusionary and anticompetitive acts, by engaging in attempted monopolization of the Web market and thirdly by tying its browser unlawfully to the system of operation and also initiating dealing agreements that restrained trade in unfavorable ways thereby violating Sherman’s Act (Mallor, Barnes, Bowers, & Langvardt, 2010).
The judgment was entered in two consolidated actions, one brought by the Antitrust Division of the U.S. Department of Justice and the other by nineteen States and the District of Columbia which launched the antitrust suit, accusing the company of trying to drive competitors out of business. This group collected facts and insight from both the consumer/government and Microsoft to show the merits of the case from each side. In the long run, justice was on the side of the consumer and small business owner. The case went to trial in October 1998. Government Side Judge Thomas Penfield Jackson found that software developer Microsoft violated the Sherman Antitrust Act.
The first six years of the new millennium saw continuous board infighting, the summary firing of Carly Fiorina, Chairwoman and CEO from July 1999 to February 2005, leaks of board discussions to the press, the use of illegal monitoring tactics and pretexting of suspected board members, a senate hearing, felony (criminal) charges levied against Patricia Dunn, the Chairwoman who followed Fiorina, HP executives and contractors, and an insider trading suit against Mark Hurd, Chairman and CEO. While the worst of the scandal appears to be behind HP, the episode is an object lesson on the corporate governance woes that can beset an organization. Background on The HP Way & its Demise William Hewlett and Dave Packard instituted a management philosophy called the HP Way. It included a value system that set the standard for ethical behavior in Silicon Valley and beyond - a set of values that included integrity, respect for individuals, teamwork, employee retention, innovation, contribution to customers and the community. While the founders stated that profitability was a primary objective they also placed valuing the people & their accountability.
She was not only making these changes, she was making them purposely, with the attempt to alter the financial statements. A third administrative order found that Paul Hiznay, who was a former accounting manager at CUC’s, was making unsupported journal entries that Pember had directed. These journal entries were being aided and abetted violations of the periodic reporting provisions of the federal securities laws. In 2001 the SEC filed a civil enforcement action in the US District Court for the District of New Jersey against Walter A. Forbes, the former chair of the board of directors. Forbes was accused by the SEC of fraud from the beginning of 1985, the president and COO of CUC were also involved in