Creative Accounting Fraud and International Accounting Scandals 1st Edition by Michael Jones 9780470973615 0470973617

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ISBN 10: 0470973617
ISBN 13: 9780470973615
Author: Michael Jones

 

Business scandals are always with us from the South Sea Bubble to Enron and Parmalat.  As accounting forms a central element of any business success or failure, the role of accounting is crucial in understanding business scandals. This book aims to explore the role of accounting, particularly creative accounting and fraud, in business scandals. The book is divided into three parts. In Part A the background and context of creative accounting and fraud is explored. Part  B looks at a series of international accounting scandals and Part  C draws some themes and implications from the country studies.

 

Creative Accounting Fraud and International Accounting Scandals 1st Table of contents:

List of Contributors
Preface
Acknowledgements

PART A
Introduction – Setting the Scene
Introduction
Exploring the Terms
Creative Accounting
Fraud
Other Terms
Structure of the Book
Increase Income
Decrease Expenses
Increase Assets
Decrease Liabilities
Conclusion
The Creative Accounting and Fraud Environment
Introduction
The Main Actors
Managers
Investment Analysts
Regulators
Auditors
Shareholders
Merchant Banks
Other Users
Legal Authorities
Effective Corporate Governance
Effective Internal Controls
Division of the Responsibility between Chief Executive and Chairman
Audit Committee
Independent Board of Directors
Economic Environment
Conclusion
Motivations to Indulge in Creative Accounting and Fraud
Introduction
Personal Incentives
Market Expectations
Special Circumstances
Cover-up Fraud
Conclusion
Methods of Creative Accounting and Fraud
Introduction
Basic Principles
Nature of Accounting
Methods of Creative Accounting
Strategy: Increase Income
Strategy: Decrease Expenses
Strategy: Increase Assets
Strategy: Decrease Liabilities
Strategy: Increase Operating Cash Flow
Simple Numerical Example
Fraud
Misappropriation of Assets
Fictitious Transactions
Conclusion
Evidence for Creative Accounting and Fraud
Introduction
The Descriptive Studies
Ian Griffiths, Creative Accounting
County Natwest WoodMac, Company Pathology
UBS Phillips & Drew, Accounting for Growth
Trevor Pijper, Creative Accounting
Frank Clarke, Graeme Dean and Kyle Oliver, Corporate Collapse: Accounting, Regulatory and Ethics
Frank Clarke and Graeme Dean, Indecent Disclosure: Gilding the Corporate Lily
McBarnet and Whelan, Creative Accounting and the Cross-eyed Javelin Thrower
Charles Mulford and Eugene Comiskey, The Financial Numbers Game
Beasley, Carcello and Hermanson, Fraudulent Financial Reporting: An Analysis of U.S.
Joseph Wells, Principles of Fraud Examination
The Statistical Studies
Earnings Management Studies
Conclusion
Impression Management
Introduction
Accounting Narratives
Graphs
Conclusion
Taking the Long View: Accounting Scandals over Time
Introduction
Ancient and Medieval
Seventeenth and Eighteenth Centuries
Nineteenth Century
Twentieth Century: Before Second World War
Twentieth Century: 1945–1980s
Conclusion

PART B
Accounting Scandals in Australia since the Late 1980s
Introduction
Overview of Accounting Scandals during and since the 1890s
Case Studies of Accounting Scandals since the Late 1980s
Adelaide Steamship
Bond Corporation
Harris Scarfe
One.Tel
HIH Insurance
Background
Why did HIH Collapse?
Accounting Issues
Legal Outcomes Arising from the HIH Collapse
Corporate Governance Reforms Following the Accounting Scandals of the Early 2000s
Conclusion
Corporate Accounting Scandals in China
Introduction
Summary of Corporate Scandals
Shenzhen Yuanye
Great Wall Fund Raising
Hongguang
Daqing Lianyi
Kangsai Group
Lantian Gufen
A Case in Depth – Zhengzhou Baiwen
Background
Themes of the Scandal
Who is to Blame?
Consequences of the Baiwen Scandal
Aftermath
Conclusion
Accounting Scandals in Germany
Introduction
Accounting Scandals Between 1985 and 2006
Co op AG
Balsam AG
Bremer Vulkan Verbund AG
Philipp Holzmann AG
Most Important Cases: Flowtex and Comroad
Flowtex Gmbh & Co. KG
ComRoad AG
Accounting Scandals and Regulatory Responses
Examinations of the German Financial Reporting Enforcement Panel
Conclusion
Creative Accounting and Fraud in Greece
Introduction
Two Accounting Scandals
ETBA Finance
Dynamic Life
The Bank of Crete Scandal
Koskotas’s Employment with the Bank of Crete
The Accounting Information Systems of the Time
The Economic Environment at that Time
The Aftermath
Conclusions
Corporate Creative Accounting in India: Extent and Consequences
Introduction
Some Examples of Creative Accounting in India
Some Important Corporate Cases in India
The Satyam Computer Services Ltd Scandal
Background
Satyam: A Global Organisation
Alleged Possible Processes and their Impact
Good Guy, Bad Choices
Role of the Auditors
Institution of Legal Proceedings
Salvaging Satyam
Rebuilding the Corporate Image
Some Antidotes
Aftermath
Changes in the Companies Act
Measures Taken by the SEBI
Prudential Norms of the RBI
Conclusion
Acknowledgements
Creative Accounting and Accounting Scandals in Italy
Introduction
Creative Accounting Practices in Italy: A Case Study Analysis
The Choice of Consolidation Technique
The Accounting of Stock Options
The Accounting of ‘Creative Gains’ in Football Club Companies
The Most Important Accounting Fraud in Italy: The Parmalat Case
Parmalat: Was it a Case of Creative Accounting or of False Accounting?
Key Accounting Issues at Parmalat
The Role of Corporate Governance Actors
The Role of Information Demand-side Actors
The Aftermath of the Parmalat Scandal
Conclusion
Creative Accounting and Accounting Scandals in Japan
Introduction
Accounting Regulations and Standards in Japan
Accounting Regulations
Accounting Standards
Short History of Accounting Scandals Before the 1980s
Three Types of Accounting Scandal Post-1980s
Accounting Scandal to Maintain High Share Prices
Accounting Scandal Related to Contracts
Accounting Scandal to Avoid Bankruptcy
Consequences of the Accounting Scandals
Revision of Accounting Standards for Consolidated Financial Statements
Reorganization of Audit Firms
Establishing Internal Control Systems
Conclusion
Financial Accounting Scandals in the Netherlands
Introduction
Some Minor Accounting Scandals
Creative Accounting at Rijn-Schelde-Verolme (RSV)
Creative Accounting at Fokker
Royal Ahold
Consolidation of Joint Ventures at Royal Ahold
Consolidation Accounting in the Netherlands
Consolidation Accounting under US GAAP
The Control and Side Letters
Accounting for Vendor Allowances at US Foodservice (USF)
Proper Accounting Treatment Vendor Allowances
Measures Taken by Royal Ahold after Discovering the Fraud
Acquisition Accounting
Reserves, Allowances and Provisions
Lease Accounting
Conclusion
Creative Accounting and Financial Scandals in Spain
Introduction
Accounting Scandals in Spain Since the 1980s
The Banking Sector
Investment Service Firms
The Real Estate Sector: The Case of PSV and IGS
Investments in Stamps: The Latest Series of Financial Scandals in the Country
Background of the Cases of Afinsa and Fórum Filatélico
The Nature of the Businesses and the Accounting for Investment Contracts
The Suppliers
Valuation of Stamps
Reflections on the Scandal
Where were the Auditors?
Was it a Surprise?
Consequences of the Scandal
The Aftermath of the Scandals
Conclusion
Accounting Scandals in Sweden – A Long Tradition
Introduction
Fermenta and Prosolvia: Swedish Stock Market Darlings
Fermenta – 1980s Biotech Company’s Accounting Errors
Prosolvia – 1990s Experts in Simulating Virtual Reality?
Reconstruction of Ownership
Fictitious Invoices, Invented Agreements and Premature Income Recognition
Insider Trading
Two Scandals in Multinationals that Dominated the Swedish Media
ABB – Shaken and Stirred
Skandia – A Shooting Star Turns into a White Dwarf
Conclusions
Creative Accounting – The UK Experience
Introduction
Historical Background
Some Recent Accounting Scandals
Bank of Credit and Commerce International (BCCI)
The Mirror Group
Polly Peck
Meyna
Vestel
Unipac
Accounting Policies at Polly Peck
The Immediate Aftermath
Accounting Regulatory Change
Governance and Enforcement
Subsequent Developments
Conclusions
Acknowledgements
Creative Accounting and Accounting Scandals in the USA
Introduction
Scandals since the 1990s
Premature or Fictitious Revenue Recognition
Capitalized Costs and/or Extended Amortization Periods
Overstated Assets and/or Understated Liabilities
Other Creative Accounting Practices
Enron and Worldcom
Enron Corp.
WorldCom, Inc.
Aftermath of the Scandals
Bank Failures and Accounting During the Financial Crisis of 2008–2009
Introduction
Kaupthing Bank
Northern Rock
Origins of the ‘Credit Crunch’
Sub-prime Lending
Types of Mortgage
Economic Downturn and Rising Unemployment
Financial Instruments Associated with the Credit Crunch
Collateralised Debt Obligations (CDOs)
Credit Default Swaps (CDS)
Collateralised Mortgage Obligations (CMOs)
Securitisation and Off-balance Sheet Financing
Repurchase agreements or ‘repos’
Creative Accounting in the Banking Sector
Loan-loss Allowances
Adjustment of Reporting Dates
Enhancing Profits through Disposals of Assets
Lawful Adjustments to Composition of ‘Level 3’ Assets in Banks’ Balance Sheets
Decline in Value of Outstanding Debt
Lehman’s, Madoff and Bear Stearns; Failures and Consequences
Lehman Brothers
Bernard Madoff
Bear Stearns
Conclusion

PART C
Identifying Some Themes
Introduction
Some Themes
Background
Creative Accounting or Fraud
The Major Methods Used
Strategy: Increasing Income
Strategy: Decreasing Expenses
Strategy: Increasing Assets
Strategy: Decreasing Liabilities
Other Methods of Creative Accounting
Methods of Fraud
Incentives for Creative Accounting and Fraud
Overstrong Personalities
Failure of Internal Controls
Failure of External Auditors
Conclusion
The Impact of Accounting Scandals and Creative Accounting
Introduction
Short-term Immediate Effects
Insiders
Outsiders
Long-term Effects
One-off Regulatory Responses
Cumulative Effects
Conclusion
Conclusion – Looking Backwards and Forwards
Overview
Thematic Analysis
Lessons for the Future
Factors Increasing the Possibilities of Creative Accounting and Fraud
Factors Reducing the Potential for Creative Accounting and Fraud
Prognosis
Conclusion

Appendix Chronological List of Major Instances of Accounting Issues Across 12 Countries and Beyond
Appendix Alphabetical List of Most Important Accounting Scandals Across 12 Countries and Beyond
Index
EULA

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