Companies Should Be Controlled And Directed Accordance With A System Of Good Corporate Governance And Ethical Business Principles

Phar-Mor, Inc was a thriving discount grocery store in the late 1980’s. Phar-Mor was moving product quickly but profit margins were not significant enough to pay the bills. By the early 1990’s, Phar-Mor declared bankruptcy due to fraudulent financial reporting and misappropriation of assets, making it one of the largest frauds in U.S. history. Below, we will use auditing standard AU 316.85 Appendix A in conjunction with the video “How to Steal $500 million” to analyze how incentives/pressures, opportunities, and attitudes/rationalizations allowed for fraud to start and continue at Phar-Mor.

Finally, ABC shareholders are the ultimate losers from accounting malpractice due to misinformation, which might spiral into an ending series of deceptive behaviours to cover up for a technically bankrupt company. Rather than being aware of the situation and working out a solution with management, the shareholders will be provided with an illusion covering up a gradually broken

In this case, it may be that they do not have any internal controls. Top level management needs to ensure these controls are created and being met. I think safeguards in financial reporting should within the company’s internal mechanisms. “Putting COSO’s Theory into Practice” explains how their framework can be used for internal audits. This will guide companies in a direction which will benefit everyone from top executives to all stakeholders. The COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework consists of components such as monitoring, control activities, information & communication, risk assessment, and control environment. All of these components put together create a system that will help mitigate risks. This framework also helps with enhancing current controls to ensure the reliability of their financial statements. I believe that Waltham’s lack of internal controls has caused some of the instability in their financial reporting. For the month of May, they had no monitoring of their lost contracts and also had no mention of how many units the contract was for or if they already created the units. The report was communicated informally, and not very concise or consistent. There was no control environment to ensure consistency within this reporting.

In 1985, an attempt was made to falsify certain store inventories which was uncovered by the auditors. The auditors accepted an excuse that it was not sanctioned by management.

Confirmation is the process of obtaining and evaluating a direct communication from a third party in response to a request for informationabout a particular item affecting financial statement assertions. In the American food suppliers’ case study, third party confirmation was used where they relied on the vendors’ sales people. The audit team investigating the company did not rely on the accounting department of the American Food Suppliers’. However, employees from American Food Suppliers had colluded with some of it suppliers. On further investigation, it was discovered that American Food Suppliers had requested its sales people to sign false documentation. The forensic audit conducted revealed that the company had lost more than nine hundred million U.S. Dollar. The company had overstated vendor allowance receivables and had prematurely been recognized. The report indicated that fraud had occurred in various Barnacle subsidiaries as well as the parent company.

This subject company in this case study is WoolEx Mills. The top management team at the Mills had to act fast to prevent the accusations charged upon them, so that they may venture deep into the United States market. In the process, they had to act in a way that will present the company’s financial statements; cash flows in a way that they did not show any suspicious fraudulent activities. The type of fraud in this case study is known as manipulation of accounts which involves the act of offering the accounts in the way they are not in reality.

Members of management even went as far to further control the timing and release of these already fictitious revenues and profit. Throughout the span of these fraudulent schemes, members of management including Wiles, Goodman, Schleibaum, and Wolfe, deliberately overstated reserves in certain periods of high earnings and subsequently released these reserves into income in less

With Royal Ahold 's fast paced rise to the top of the industry, everything came to a halt when Deloitte (Royal Ahold 's auditors) suspended the 2002 audit of the company when Royal Ahold’s fraud finally came to the surface. The massive fraud affected many different parties. Ahold

What happened: Millions of dollars in losses were split among the 129 stores and put as an expense on each stores balance sheet ->. In order to balance the expenses, management had to boost its assets by inflating inventory -> The auditor Coopers&Lybrant checked only 4 stores out of 129 in order to safe their money. In addition, they told senior management which stores they will check -> Phar-Mor prepared the inventory in accordance with its balance sheet -> The auditing firm was unable to uncover the fraud.

Secondly, Molex’s management team may have chosen to hide the accounting issue because it was reluctant to harm its investor confidence. If the firm discloses the issue to the auditors, the auditors would probably force Molex to report the error to the public. Especially during that period of intense accounting frauds, investors’ trust for the Molex’s management team would probably degrade significantly. The managers’ concerns for investor trusts justify why the firm failed to disclose details of its adjustment in its 2004 first quarter earnings report.

The dismissal of negative forecasts without investigation does not allow the organization the ability to correct potential problems. The consequence of an action that appears to be a cover-up, is other organizational members my also feel covering up decisions is acceptable. Jamie was rather upset that his decision to change pricing was not kept away from Cardullo. The issue created when Cardullo made the executive decision to change all pricing with the help of the controller was a serious misstep. Even in the face of serious disagreement by the senior staff, Cardullo made a unilateral decision that proved to be disastrous for the organization. Cardullo failed to account for the diversity in the market.

Good governance will not result from a mindless quantities compliance with a governance code or rules. Good governance involves fairness, accountability, responsibility and transparency on a foundation of intellectual honesty. One has to employ one’s practised abilities and honestly apply one’s mind in an unfettered and unbiased manner in making a decision that is in the best interests of the company.

The collective understanding of all the three investigative agencies’ records in September 2012, four months after the criminal complaint was filed, detected ‘systematic mismanagement’ in the running of the company, and the keeping of its accounts. The mismanagement included violations of business procedures (over-invoicing and overvalued invoicing, for instance), which in turn could have led to income tax violations.

Corporate governance is a model in which processes and relations by which corporations are controlled and directed. It can also be defined as a system of laws and authoritative approaches by which corporations are directed and controlled. This is achieved by considering the internal and external structures of the corporations. The intentions include monitoring actions of management and directors to moderate agency risks, which may be rooted in the misdeeds of corporate officers. This ensures that these risks and conflicts are prevented and moderated using policies, laws, customs, processes, and institutions that have great impacts on the way a corporation is controlled. This corporate governance has great impacts on firm performance,

Corporate governance importance arises in modern corporations due to the separation of management and ownership control in the organizations. In this task the three key elements that are thought seriously about are social responsibilty, shareholder