Accounting ethics - Wikipedia, the free encyclopedia
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Accounting ethics
From Wikipedia, the free encyclopedia
"Accountants and the accountancy profession exist as a means of public
Accounting ethics is primarily a
service; the distinction which separates a profession from a mere means
field of applied ethics, the study of
of livelihood is that the profession is accountable to standards of the
moral values and judgments as they
public interest, and beyond the compensation paid by clients."
apply to accountancy. It is an
—Robert H. Montgomery, describing ethics in accounting[1]
example of professional ethics.
Accounting ethics were first
introduced by Luca Pacioli, and
later expanded by government groups, professional organizations, and independent companies. Ethics are
taught in accounting courses at higher education institutions as well as by companies training accountants
and auditors.
Due to the diverse range of accounting services and recent corporate collapses, attention has been drawn
to ethical standards accepted within the accounting profession.[2] These collapses have resulted in a
widespread disregard for the reputation of the accounting profession.[3] To combat the criticism and
prevent fraudulent accounting, various accounting organizations and governments have developed
regulations and remedies for improved ethics among the accounting profession.
Contents
„
„
„
„
1 Importance of ethics
2 History
3 Teaching ethics
4 Accounting scandals
„ 4.1 Causes
„ 4.1.1 Principles- vs. rules-based
„
„
„
„
4.2 Responses to scandals
5 References
6 Further reading
7 External links
Importance of ethics
The nature of the work carried out by accountants and auditors requires a high level of ethics.
Shareholders, potential shareholders, and other users of the financial statements rely heavily on the yearly
financial statements of a company as they can use this information to make an informed decision about
investment.[4] They rely on the opinion of the accountants who prepared the statements, as well as the
auditors that verified it, to present a true and fair view of the company.[5] Knowledge of ethics can help
accountants and auditors to overcome ethical dilemmas, allowing for the right choice that, although it
may not benefit the company, will benefit the public who relies on the accountant/auditor's reporting.[6]
Most countries have differing focuses on enforcing accounting laws. In Germany, accounting legislation
is governed by "tax law"; in Sweden, by "accounting law"; and in the United Kingdom, by the "company
law". In addition, countries have their own organizations which regulate accounting. For example,
Sweden has the Bokföringshämnden (BFN - Accounting Standards Board), Spain the Instituto de
Comtabilidad y Auditoria de Cuentas (ICAC), and the United States the Financial Accounting Standards
Board (FASB).[7]
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History
Luca Pacioli, the "Father of Accounting", wrote on accounting ethics in
his first book Summa de arithmetica, geometria, proportioni, et
proportionalita, published in 1494.[8] Ethical standards have since then
been developed through government groups, professional organizations,
and independent companies. These various groups have led accountants
to follow several codes of ethics to perform their duties in a professional
work environment. Accountants must follow the code of ethics set out
by the professional body of which they are a member. United States
accounting societies such as the Association of Government
Accountants, Institute of Internal Auditors, and the National Association
of Accountants all have codes of ethics, and many accountants are
members of one or more of these societies.[9]
Pacioli wrote on accounting
ethics in 1494
In 1887, the American Association of Public Accountants (AAPA) was created; it was the first step in
developing professionalism in the United States accounting industry.[10] During its twentieth anniversary
meeting in October 1907, ethics was a major topic of the conference among its members. As a result of
discussions, a list of professional ethics was incorporated into the organization's bylaws. However,
because membership to the organization was voluntary, the association could not require individuals to
conform to the suggested behaviors.[10] The AAPA was renamed several times throughout its history,
before becoming the American Institute of Certified Public Accountants (AICPA) as its named today. The
AICPA developed five divisions of ethical principles that its members should follow: "independence,
integrity, and objectivity"; "competence and technical standards"; "responsibilities to clients";
"responsibilities to colleagues"; as well as "other responsibilities and practices".[11] Each of these
divisions provided guidelines on how a Certified Public Accountant (CPA) should act as a professional.
Failure to comply with the guidelines could have caused an accountant to be barred from practicing.
When developing the ethical principles, the AICPA also considered how the profession would be viewed
by those outside of the accounting industry.[11]
Teaching ethics
Universities began teaching business ethics in the 1980s. Courses on this subject have grown significantly
in the last couple of decades.[12] Teaching accountants about ethics can involve role playing, lectures,
case studies, guest lectures, as well as other mediums.[9] Recent studies indicate that nearly all accounting
textbooks touch on ethics in some way.[13] In 1993, the first United States center that focused on the
study of ethics in the accounting profession opened at State University of New York at Binghamton.[14]
Starting in 1999, several U.S. states began requiring ethics classes prior to taking the CPA exam.[13]
In 1988, Stephen E. Loeb
Seven goals of accounting ethics education
proposed that accounting
ethics education should
„ Relate accounting education to moral issues.
include seven goals
„ Recognize issues in accounting that have ethical implications.
(adapted from a list by
„ Develop "a sense of moral obligation" or responsibility.
Daniel Callahan).[9] To
„ Develop the abilities needed to deal with ethical conflicts or dilemmas.
„ Learn to deal with the uncertainties of the accounting profession.
implement these goals,
„ "Set the stage for" a change in ethical behavior.
he pointed out that
„ Appreciate and understand the history and composition of all aspects of
accounting ethics could
accounting ethics and their relationship to the general field of ethics. —
be taught throughout
Stephen E. Loeb[9]
accounting curriculum or
in an individual class
tailored to the subject.
Requiring it be taught throughout the curriculum would necessitate all accounting teachers to have
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knowledge on the subject (which may require training). A single course has issues as to where to include
the course in a student's education (for example, before preliminary accounting classes or near the end of
a student's degree requirements), whether there is enough material to cover in a semester class, and
whether most universities have room in a four-year curriculum for a single class on the subject.[9]
There has been debate on whether ethics should be taught in a university setting. Supporters point out that
ethics are important to the profession, and should be taught to accountants entering the field.[15] In
addition, the education would help to reinforce students' ethical values and inspire them to prevent others
from making unethical decisions.[12] Critics argue that an individual is ethical or not, and that teaching an
ethics course would serve no purpose.[15][16] Despite opposition, instruction on accounting ethics by
universities and conferences, has been encouraged by professional organizations and accounting firms.[17]
The Accounting Education Change Commission (AECC) has called for students to "know and understand
the ethics of the profession and be able to make value-based judgments."[18]
Phillip G. Cottel argued that in order to uphold strong ethics, an accountant "must have a strong sense of
values, the ability to reflect on a situation to determine the ethical implications, and a commitment to the
well-being of others."[19] Iris Stuart recommends an ethics model consisting of four steps: the accountant
must recognize that an ethical dilemma is occurring; identify the parties that would be interested in the
outcome of the dilemma; determine alternatives and evaluate its effect on each alternative on the
interested parties; and then select the best alternative.[20]
Accounting scandals
Main article: Accounting scandals
Accounting ethics has been deemed difficult to control as accountants and auditors must consider the
interest of the public (which relies on the information gathered in audits) while ensuring that they
remained employed by the company they are auditing.[9][21] They must consider how to best apply
accounting standards even when faced with issues that could cause a company to face a significant loss or
even be discontinued. Due to several accounting scandals within the profession, critics of accountants
have stated that when asked by a client "what does two plus two equal?" the accountant would be likely to
respond "what would you like it to be?".[21] This thought process along with other criticisms of the
profession's issues with conflict of interest, have led to various increased standards of professionalism
while stressing ethics in the work environment.
From the 1980s to the present there
"Every company in the country is fiddling its profits. Every set of
have been multiple accounting
published accounts is based on books which have been gently cooked or
scandals that were widely reported
completely roasted. The figures which are fed twice a year to the
on by the media and resulted in
investing public have all been changed in order to protect the guilty. It
fraud charges, bankruptcy
is the biggest con trick since the Trojan horse. ... In fact this deception is
protection requests, and the closure
all in perfectly good taste. It is totally legitimate. It is creative
of companies and accounting firms.
accounting."
The scandals were the result of
—Ian Griffiths in 1986, describing creative accounting[1]
creative accounting, misleading
financial analysis, as well as
bribery. Various companies had issues with fraudulent accounting practices, including Nugan Hand Bank,
Phar-Mor, WorldCom, and AIG. One of the most widely-reported violation of accounting ethics involved
Enron, a multinational company, that for several years had not shown a true or fair view of their financial
statements. Their auditor Arthur Andersen, an accounting firm considered one of the "Big Five", signed
off on the validity of the accounts despite the inaccuracies in the financial statements.[22] When the
unethical activities were reported, not only did Enron dissolve but Arthur Andersen also went out of
business. Enron's shareholders lost $25 billion as a result of the company's bankruptcy.[23] Although only
a fraction of Arthur Anderson's employees were involved with the scandal, the closure of the firm resulted
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in the loss of 85,000 jobs.[24][25]
Causes
Fraudulent accounting can arise from a variety of issues. These problems usually come to light eventually
and could ruin not only the company but also the auditors for not discovering or revealing the
misstatements. Several studies have proposed that a firm's corporate culture as well as the values it
stresses may negatively alter an accountant's behavior.[26][27] This environment could contribute to the
degradation of ethical values that were learned from universities.[2]
Until 1977, ethics rules prevented accounting and auditing firms from advertising to clients. When the
rules were lifted, spending by the largest CPA firms on advertisements rose from US$4 million in the
1980s to more than $100 million in the 2000s.[28] Critics claimed that, by allowing the firms to advertise,
the business side overstepped the professional side of the profession, which led to a conflict of interest.
This focus allowed for occurrences of fraud, and caused the firms, according to Arthur Bowman, "... to
offer services that made them more consultants and business advisers than auditors."[28] As accounting
firms became less interested in the lower-paying audits due to more focus on higher earning services such
as consulting, problems arose.[29] This disregard for the lack of time spent on audits resulted in a lack of
attention to catching creative and fraudulent accounting.[30]
A 2007 article in Managerial Auditing Journal determined the top nine factors that contributed to ethical
failures for accountants based on a survey of 66 members of the International Federation of Accountants.
The factors include (in order of most significant): "self interest, failure to maintain objectivity and
independence, inappropriate professional judgment, lack of ethical sensitivity, improper leadership and
ill-culture, failure to withstand advocacy threats, lack of competence, lack of organizational and peer
support, and lack of professional body support."[2] The main factor, self interest, is the motivation by an
accountant to act in his/her best interest or when facing a conflict of interest.[2] For example, if an auditor
has an issue with an account he/she is auditing, but is receiving financial incentives to ignore these issues,
the auditor may act unethically.
Principles- vs. rules-based
The International Financial Reporting Standards (IFRS) are standards and interpretations developed by
the International Accounting Standards Board, which are principle-based.[31] IFRS are used by over 115
countries including the European Union, Australia, and Hong Kong.[32] The United States Generally
Accepted Accounting Principles (GAAP), the standard framework of guidelines for financial accounting,
is largely rule-based.[31] Critics have stated that the rules-based GAAP is partly responsible for the
number of scandals that the United States has suffered.[30] The principles-based approach to monitoring
requires more professional judgment than the rules-based approach.[33]
IFRS is based on "understandability, relevance, materiality, reliability, and comparability".[34] Since
IFRS has not been adopted by all countries, these practices do not make the international standards viable
in the world domain. In particular, the United States has not yet conformed and still uses GAAP which
makes comparing principles and rules difficult. In August 2008, the Securities and Exchange Commission
(SEC) proposed that the United States switch from GAAP to IFRS, starting in 2014.[31]
Responses to scandals
Since the major accounting scandals, new reforms, regulations, and calls for increased higher education
have been introduced to combat the dangers of unethical behavior.[35] By educating accountants on ethics
before entering the workforce, such as through higher education or initial training at companies, it is
believed it will help to improve the credibility of the accounting profession.[3] Companies and accounting
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organizations have expanded their assistance with educators by providing education materials to assist
professors in educating students.[36]
New regulations in response to the scandals include the Corporate Law Economic Reform Program Act
2004 in Australia as well as the Sarbanes-Oxley Act of 2002, developed by the United States.[2]
Sarbanes-Oxley limits the level of work which can be carried out by accounting firms. In addition, the
Act put a limit on the fee which a firm can receive from one client as a percentage of their total fees. This
ensures that companies are not wholly reliant on one firm for its income, in the hope that they do not need
to act unethically to keep a steady income. The act also protects whistleblowers and requires senior
management in public companies to sign off on the accuracy of its company's accounting records. In
2002, the five members of the Public Oversight Board (POB), which oversaw ethics within the
accounting profession, resigned after critics deemed the board ineffective and the SEC proposed
developing a new panel, the Public Company Accounting Oversight Board (PCAOB).[37] The PCAOB
was developed through the Act, and replaced the POB.[38]
In 2003, the International Federation of Accountants released a report entitled Rebuilding Public
Confidence in Financial Reporting: An International Perspective.[39] By studying the international
company collapses as a result of accounting issues, it determined areas for improvement within
organizations as well as recommendations for companies to develop more effective ethics codes. The
report also recommended that companies pursue options that would improve training and support so
accountants could better handle ethical dilemmas.[2]
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KSbdSZzdC6bslQeK84n8DQ&sa=X&oi=book_result&ct=result&resnum=10). Euromoney Books. p. 134.
ISBN 1843742675. http://books.google.com/books?
id=00Jco44doU0C&pg=PA134&lpg=PA134&dq=relevance,+reliability,+comparability,+understandability,+a
nd+materiality+IFRS&source=bl&ots=ZTD2g4UJrm&sig=BONzkZyQ9JHaLUcnFo5HCfAiurg&hl=en&ei=
KSbdSZzdC6bslQeK84n8DQ&sa=X&oi=book_result&ct=result&resnum=10.
35. ^ Johnsson, Hans; Per Erik Kihlstedt (2005). Performance-Based Reporting (http://books.google.com/books?
id=T2sIinuZlHIC&pg=PA9&dq=%22accounting+ethics%22&lr=#PPA17,M1). John Wiley & Sons. p. 17.
ISBN 0471735434. http://books.google.com/books?id=T2sIinuZlHIC&pg=PA9&dq=%22accounting+ethics%
22&lr=#PPA17,M1.
36. ^ Mader, Becca (May 3, 2002). "Enron case causes colleges to champion accounting ethics
(http://www.bizjournals.com/milwaukee/stories/2002/05/06/focus1.html)". The Business Journal.
http://www.bizjournals.com/milwaukee/stories/2002/05/06/focus1.html. Retrieved April 8, 2009.
37. ^ Labaton, Stephen (January 23, 2002). "Accounting Ethics Panel Members Resign, Rejecting Sec Chief's
Plan (http://news.google.com/newspapers?
id=YuwNAAAAIBAJ&sjid=M3ADAAAAIBAJ&pg=3645,467306&dq=accounting+ethics)". Pittsburgh
Post-Gazette. http://news.google.com/newspapers?
id=YuwNAAAAIBAJ&sjid=M3ADAAAAIBAJ&pg=3645,467306&dq=accounting+ethics. Retrieved
April 8, 2009.
38. ^ Hilton, Ronald W. (2005). Managerial Accounting: Creating Value in a Dynamic Business Environment
(Sixth ed.). Boston: McGraw Hill/Irwin. p. 26. ISBN 0071113142.
39. ^ Crow, John; Christian Aubin, Olivia Kirtley, Kosuke Nakahira, Ian Ramsay, Guylaine Saucier, and Graham
Ward (August 2003). "Rebuilding Public Confidence in Financial Reporting: An International Perspective
(http://www.ifac.org/Credibility/ViewPoints_PubDL.php?PubID=00061)" (PDF). International Federation of
Accountants. http://www.ifac.org/Credibility/ViewPoints_PubDL.php?PubID=00061. Retrieved April 8,
2009.
Further reading
„
Armstrong, Mary Beth. Ethics and Professionalism for CPAs. Thomson South-Western, 1993.
ISBN 0-538-82301-1.
http://en.wikipedia.org/wiki/Accounting_ethics
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Accounting ethics - Wikipedia, the free encyclopedia
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Page 8 of 8
Carey, John L. Professional Ethics of Public Accounting. New York: Arno Press, 1980. ISBN 0405-13506-8.
Carey, John L. William O. Doherty. Ethical Standards of the Accounting Profession. New York:
Garland Pub., 1986. ISBN 0-824-07877-2.
Cheffers, Mark. Michael Pakaluk. Understanding Accounting Ethics. Allen David Press, 2007.
ISBN 0-976-52800-2.
Cottell Jr., Philip G. Terry M. Perlin. Accounting Ethics: A Practical Guide for Professionals. New
York: Quorum Books, 1990. ISBN 0-899-30401-X.
Davis, Michael. Andrew Stark. Conflict of Interest in the Professions. Oxford: Oxford University
Press, 2001. ISBN 0-195-12863-X.
Guy, Dan M. D.R. Carmichael, Linda A. Lach. Ethics for CPAs: Meeting Expectations in
Challenging Times. Hoboken, NJ: Wiley, 2003. ISBN 0-471-27176-4.
Hoffman, W. Michael. The Ethics of Accounting and Finance: Trust, Responsibility, and Control.
Westport, CT: Quorum Books, 1996. ISBN 0-899-30997-6.
Mills, Daniel Quinn. Wheel, Deal, and Steal: Deceptive Accounting, Deceitful CEOs, and
Ineffective Reforms. Upper Saddle River, NJ: FT/Prentice Hall, 2003. ISBN 0-131-40804-6.
External links
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„
Financial Reporting Council (http://www.apb.org.uk/) UK's independent regulator that looks at
company reporting and governance
Collection of references on accounting ethics
(http://www.emeraldinsight.com/Insight/ViewContentServlet?
Filename=/published/emeraldfulltextarticle/pdf/0510220905_ref.html)
Retrieved from "http://en.wikipedia.org/wiki/Accounting_ethics"
Categories: Accounting scholarship | Code of conduct | Business ethics
„
„
„
This page was last modified on 18 December 2009 at 09:33.
Text is available under the Creative Commons Attribution-ShareAlike License; additional terms
may apply. See Terms of Use for details.
Wikipedia® is a registered trademark of the Wikimedia Foundation, Inc., a non-profit organization.
Contact us
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23/12/2552
Accounting scandals - Wikipedia, the free encyclopedia
Page 1 of 6
Accounting scandals
From Wikipedia, the free encyclopedia
Accounting scandals, or corporate accounting scandals, are political and business scandals which arise
with the disclosure of misdeeds by trusted executives of large public corporations. Such misdeeds
typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating
expenses, overstating the value of corporate assets or underreporting the existence of liabilities,
sometimes with the cooperation of officials in other corporations or affiliates.
In public companies, this type of "creative accounting" can amount to fraud and investigations are
typically launched by government oversight agencies, such as the Securities and Exchange Commission
(SEC) in the United States.
Unfortunately, scandals are often only the 'tip of the iceberg'. They represent the visible catastrophic
failures. Note that much abuse can be completely legal or quasi legal.
For example, in the domain of privatization and takeovers :
It is fairly easy for a top executive to reduce the price of his/her company's stock - due to information
asymmetry. The executive can accelerate accounting of expected expenses, delay accounting of expected
revenue, engage in off balance sheet transactions to make the company's profitability appear temporarily
poorer, or simply promote and report severely conservative (eg. pessimistic) estimates of future earnings.
Such seemingly adverse earnings news will be likely to (at least temporarily) reduce share price. (This is
again due to information asymmetries since it is more common for top executives to do everything they
can to window dress their company's earnings forecasts). There are typically very few legal risks to being
'too conservative' in one's accounting and earnings estimates.
A reduced share price makes a company an easier takeover target. When the company gets bought out (or
taken private) - at a dramatically lower price - the takeover artist gains a windfall from the former top
executive's actions to surreptitiously reduce share price. This can represent tens of billions of dollars
(questionably) transferred from previous shareholders to the takeover artist. The former top executive is
then rewarded with a golden handshake for presiding over the firesale that can sometimes be in the
hundreds of millions of dollars for one or two years of work. (This is nevertheless an excellent bargain for
the takeover artist, who will tend to benefit from developing a reputation of being very generous to
parting top executives).
Similar issues occur when a publicly held asset or non-profit organization undergoes privatization. Top
executives often reap tremendous monetary benefits when a government owned or non-profit entity is
sold to private hands. Just as in the example above, they can facilitate this process by making the entity
appear to be in financial crisis - this reduces the sale price (to the profit of the purchaser), and makes nonprofits and governments more likely to sell. Ironically, it can also contribute to a public perception that
private entities are more efficiently run reinforcing the political will to sell off public assets. Again, due to
asymmetric information, policy makers and the general public see a government owned firm that was a
financial 'disaster' - miraculously turned around by the private sector (and typically resold) within a few
years.
Contents
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1 Notable accounting scandals
2 Notable outcomes
3 See also
4 References
5 External links
6 Further reading
http://en.wikipedia.org/wiki/Accounting_scandals
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Accounting scandals - Wikipedia, the free encyclopedia
Page 2 of 6
Notable accounting scandals
Company
Year
Audit Firm
1980
Nugan Hand Bank [1]
[2]
Barlow Clowes
[3]
MiniScribe
[4]
Polly Peck
[5]
Bank of Credit
and Commerce
International
[6]
Phar-Mor
[7]
Informix
[8]
Cendant
[9]
1988
1989
1991
United
States
Ernst & Young
PricewaterhouseCoopers
2000
Unify Corporation [12]
2000
Computer
Associates
[13]
Xerox
[14]
One.Tel
[15]
Enron
[16]
Adelphia
[17]
AOL
[14]
Bristol-Myers
Squibb
[14]
2000
2001
2001
2002
2002
Gilts management service. £110
million missing
United
States
1996
2000
United
Kingdom
United
Kingdom
1992
[11]
Ponzi scheme run by Barry
Minkow
United
Kingdom
1999
Waste
[10]
Management, Inc.
Microstrategy
United
States
United
States
1990
1998
Notes
Australia
1986
ZZZZ Best
Country
United
States
United
States
Financial mistatements
United
States
Michael Saylor
United
States
KPMG
United
States
Sanjay Kumar
KPMG
United
States
Falsifying financial results
Ernst & Young
Australia
Arthur Andersen
United
States
Jeffrey Skilling, Kenneth Lay,
Andrew Fastow
Deloitte & Touche
United
States
John Rigas
Ernst & Young
United
States
Inflated sales
PricewaterhouseCoopers
United
States
Inflated revenues
2002
[18]
http://en.wikipedia.org/wiki/Accounting_scandals
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Accounting scandals - Wikipedia, the free encyclopedia
2002
CMS Energy
[14]
Arthur Andersen
United
States
Round trip trades
Deloitte & Touche
United
States
Round trip trades
Arthur Andersen
United
States
Round trip trades
Deloitte & Touche
United
States
Round trip trades
United
States
Understated earnings
Arthur Andersen
Bermuda
Network capacity swaps to
inflate revenues
Arthur Andersen
United
States
Improper booking of cost
overruns
United
States
Improper booking of sales
KPMG
United
States
Samuel D. Waksal
PricewaterhouseCoopers
United
States
Misleading accounting practices
United
States
Recorded co-payments that were
not collected
United
States
Conflict of interest
United
States
Overstated assets and liabilities
United
States
Overstated assets, understated
liabilities
United
States
Overstated sales
United
States
Inflated revenues
United
States
Round trip trades
[19]
2002
Duke Energy
[14]
Dynegy
[14]
El Paso
Corporation
[14]
Freddie Mac
[20]
Global Crossing
[14]
Halliburton
[14]
Homestore.com
[14]
2002
2002
2002
2002
2002
2002
[21]
2002
ImClone Systems
[22]
Kmart
[14]
2002
[23]
2002
Merck & Co.
[14]
Merrill Lynch
[24]
Mirant
[14]
Nicor
[14]
2002
2002
KPMG
2002
Qwest
Communications
[14]
Reliant Energy
[14]
Sunbeam
[25]
2002
Deloitte & Touche
2002
2002
Tyco International [14]
WorldCom
Deloitte & Touche
2002
2002
Peregrine Systems [14]
2002
[14]
Page 3 of 6
United
States
PricewaterhouseCoopers Bermuda
Arthur Andersen
http://en.wikipedia.org/wiki/Accounting_scandals
United
States
Improper accounting, Dennis
Kozlowski
Overstated cash flows, Bernard
Ebbers
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Accounting scandals - Wikipedia, the free encyclopedia
Royal Ahold
2003
[26]
Deloitte & Touche
Netherlands
Inflating promotional
allowances
Grant Thornton SpA
Italy
Falsified accounting documents,
Calisto Tanzi
Ernst & Young
United
States
Richard M. Scrushy
United
States
Illegal payments
United
States
Accounting of structured
financial deals
United
States
Ponzi scheme run by Bernard
Madoff. David G. Friehling was
charged with securities fraud,
aiding and abetting investment
adviser fraud, and four counts of
filing false audit reports with the
Securities and Exchange
Commission in regards to this
Ponzi scheme. He faces up to
105 years in prison on all of the
charges.[33]
2003
Parmalat
[27]
[28]
2003
HealthSouth
Corporation
[29]
Chiquita Brands
International
[30]
AIG
[31]
Bernard L.
Madoff
Investment
Securities LLC
2004
2004
2008
[32]
Satyam Computer 2009
[34]
Services
Page 4 of 6
PricewaterhouseCoopers
Friehling & Horowitz
PricewaterhouseCoopers India
Falsified accounts
Notable outcomes
The Enron scandal resulted in the indictment and criminal conviction of the Big Five auditor Arthur
Andersen on June 15, 2002. Although the conviction was overturned on May 31, 2005 by the Supreme
Court of the United States, the firm ceased performing audits and is currently unwinding its business
operations.
On July 9, 2002 George W. Bush gave a speech about recent accounting scandals that have been
uncovered. In spite of its stern tone, the speech did not focus on establishing new policy, but instead
focused on actually enforcing current laws, which include holding CEOs and directors personally
responsible for accountancy fraud.
In July, 2002, WorldCom filed for bankruptcy protection, in what was considered the largest corporate
insolvency ever at the time.
These scandals reignited the debate over the relative merits of US GAAP, which takes a "rules-based"
approach to accounting, versus International Accounting Standards and UK GAAP, which takes a
"principles-based" approach. The Financial Accounting Standards Board announced that it intends to
introduce more principles-based standards. More radical means of accounting reform have been proposed,
but so far have very little support. The debate itself, however, overlooks the difficulties of classifying any
system of knowledge, including accounting, as rules-based or principles-based.
On a lighter note, the 2002 Ig Nobel Prize in Economics went to the CEOs of those companies involved
in the corporate accounting scandals of that year for "adapting the mathematical concept of imaginary
numbers for use in the business world".
http://en.wikipedia.org/wiki/Accounting_scandals
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Accounting scandals - Wikipedia, the free encyclopedia
Page 5 of 6
In 2005, after a scandal on insurance and mutual funds the year before, AIG is under investigation for
accounting fraud. The company already lost over 45 billion US dollars worth of market capitalisation
because of the scandal. This was the fastest decrease since the WorldCom and Enron scandals.
Investigations also discovered over a billion US dollars worth of errors in accounting transactions. Future
outcome for the company is still pending.
See also
„
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„
„
„
„
„
„
„
„
„
Corporate abuse
Corporate scandal
Creative accounting
Dotcom bubble
Forensic accounting
Financial crisis of 2007-2009
Philosophy of accounting
Sarbanes-Oxley Act
Savings and loan crisis
Securities fraud
Vivien v. Worldcom
White-collar crime
References
1. ^ Owen, J. Sleight of Hand : The $25 million Nugan Hand Bank Scandal; Balmain, Sydney, Australia:
Colporteur Press, 1983. ISBN 0-86399-023-1
2. ^ Minkow, Barry, Clean Sweep:The Inside Story of the Zzzz Best Scam... One of Wall Street's Biggest Frauds,
ISBN 0-7852-7916-4
3. ^ http://www.independent.co.uk/news/business/news/deloittes-john-connolly-faces-call-to-resign-overbarlow-clowes-link-572880.html
4. ^ "Fraud Is Cited at Miniscribe (http://query.nytimes.com/gst/fullpage.html?
res=950DE3DE1130F930A2575AC0A96F948260)". AP. New York Times. 1989-09-13.
http://query.nytimes.com/gst/fullpage.html?res=950DE3DE1130F930A2575AC0A96F948260. Retrieved
2007-10-12.
5. ^ Cases in Corporate Governance by Robert Wearing, Pages 41 to 53 (http://books.google.com/books?
id=Pf7KsFtWBX4C&pg=PA41&lpg=PA41&dq=UniPac+Polly+Peck&source=bl&ots=YnM90B7rnU&sig=g7c_pUKJr3xXwVSok4PBOPVGMZM&hl=en&sa=X&
6. ^ Cellan-Jones, Rory (2005-11-02). "The end of an epic (http://news.bbc.co.uk/1/hi/business/4401210.stm)".
BBC News Online (BBC). http://news.bbc.co.uk/1/hi/business/4401210.stm. Retrieved 2007-09-28.
7. ^ FRONTLINE: how to Steal $500 Million
(http://www.pbs.org/wgbh/pages/frontline/programs/transcripts/1304.html)
8. ^ A financial history of modern U.S. corporate scandals, p. 228
9. ^ http://money.cnn.com/1998/08/27/companies/cendant_folo/
10. ^ http://money.cnn.com/2001/11/07/news/waste_mgt/index.htm
11. ^ http://www.olapreport.com/Comment_MicroStrategy.htm
12. ^ http://www.sec.gov/news/press/2002-71.htm
13. ^ http://money.cnn.com/2006/04/24/technology/kumar/index.htm
14. ^ a b c d e f g h i j k l m n o p q r s http://www.forbes.com/2002/07/25/accountingtracker.html
15. ^ http://www.smh.com.au/news/business/onetel-auditor-was-linked-topacker/2005/10/25/1130239522655.html
16. ^ Robert Bryce, Pipe Dreams: Greed, Ego, and the Death of Enron (PublicAffairs, 2002) ISBN 1-58648-138X
17. ^ http://www.msnbc.msn.com/id/5396406
18. ^ http://www.sec.gov/news/digest/dig080904.txt
19. ^ http://query.nytimes.com/gst/fullpage.html?res=9D05E4D61430F935A35752C0A9619C8B63
20. ^ http://www.forbes.com/2003/12/11/cx_aw_1211freddie.html
21. ^ http://www.businessweek.com/the_thread/hotproperty/archives/2006/07/how_stuart_wolf.html
22. ^ Ex-ImClone boss admits fraud (http://news.bbc.co.uk/1/hi/business/2330649.stm)
23. ^ SEC Charges KMart's Former CEO and CFO With Financial Fraud (http://www.sec.gov/news/press/2005-
http://en.wikipedia.org/wiki/Accounting_scandals
23/12/2552
Accounting scandals - Wikipedia, the free encyclopedia
Page 6 of 6
119.htm)
24. ^ http://money.cnn.com/2002/05/21/news/companies/merrill/
25. ^ SEC Settles With Ex-Andersen Partner In Sunbeam Probe (http://securities.stanford.edu/newsarchive/2003/20030218_Headline01_Staff.htm)
26. ^ http://www.washingtonpost.com/wp-dyn/content/article/2005/11/28/AR2005112800144.html
27. ^ http://news.bbc.co.uk/2/hi/business/7790803.stm
28. ^ http://www.italiansrus.com/articles/ourpaesani/parmalat.htm
29. ^ http://www.sec.gov/litigation/litreleases/lr18044.htm
30. ^ http://www.radionetherlands.nl/news/international/6133135/Chiquita-protection-money-scandal-resurfaces
31. ^ http://www.insurancejournal.com/news/national/2004/11/24/47993.htm
32. ^ "Wall Street legend Bernard Madoff arrested over '$50 billion Ponzi
scheme' (http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5331997.ece)". Times Online
(Times Newspapers Ltd). December 12, 2008.
http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5331997.ece. Retrieved December 13,
2008.
33. ^ http://online.wsj.com/article/SB123738779664971505.html
34. ^ http://in.reuters.com/article/companyNews/idINHKG30879120090108
External links
„
„
„
U.S. Securities and Exchange Commission website (http://www.sec.gov/)
U.S. President Bush's speech, 2002-07-09 (http://www.npr.org/templates/story/story.php?
storyId=1146373) NPR report (audio recording)
"Why didn't our auditors find the
fraud?" (http://www.wislawjournal.com/archive/2006/0125/coenen-012506.html), Wisconsin Law
Journal, January 25, 2006
Further reading
„
„
„
John R. Emshwiller and Rebecca Smith, 24 Days: How Two Wall Street Journal Reporters
Uncovered the Lies that Destroyed Faith in Corporate America or Infectious Greed,
HarperInformation, 2003, ISBN 0-06-052073-6
Lawrence A. Cunningham, The Sarbanes-Oxley Yawn: Heavy Rhetoric, Light Reform (And It
Might Just Work) (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=337280)
Zabihollah Rezaee, Financial Statement Fraud: Prevention and Detection, Wiley 2002.
Retrieved from "http://en.wikipedia.org/wiki/Accounting_scandals"
Categories: Fraud | Commercial crimes | Corporate scandals | Accounting scandals
„
„
„
This page was last modified on 8 December 2009 at 14:57.
Text is available under the Creative Commons Attribution-ShareAlike License; additional terms
may apply. See Terms of Use for details.
Wikipedia® is a registered trademark of the Wikimedia Foundation, Inc., a non-profit organization.
Contact us
http://en.wikipedia.org/wiki/Accounting_scandals
23/12/2552