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Plagiarism Checker X Originality Report
Similarity Found: 10%
Date: Friday, January 05, 2018
Statistics: 86 words Plagiarized / 896 Total words
Remarks: Low Plagiarism Detected – Your Document needs Optional Improvement.
——————————————————————————————-
Question 1: The Case of Phar-Mor Inc. Summary of the Case The Phar-Mor Inc. scandal
presented one of the largest accounting fraud cases. Many people were involved in the
scandal which makes it unclear whether it could really have been averted. An
investigation of the company indicated that it had fictitious inventory.
In addition to this, there were fund diversions as well as fraud cover-ups conducted by
the executive of the company. This cost the investors millions of dollars. The initial sign
that the company was running into financial hurdles was seen in 1988 when the
investigations showed that the company was receiving lower-than-expected profit
margins. This was as a result of the company being billed of for the stock/inventory that
it had not received from Tamco (Its sister company and primary supplier).
Phar-Mor Inc. was not keeping accurate records regarding the purchases of stock from
Tamco. Therefore, the business entity’s profit margins were negatively affected due to
the missing inventory (Williams, 2011). SOX Ability to Prevent the Phar-Mor Fraud Case
SOX could have effectively averted the fraud.
To start with, section 203 of the Sarbanes-Oxley (Title II, Audit Partner Rotation) could
have ensured that the auditor is rotated. Therefore, there is a possibility that the new
auditor would have participated in the fraud. In addition to this, the rules provided in
section 206 of the SOX (Title II, Conflicts of Interest), could also have assisted in
preventing the fraud.
The section prevents the rehiring the of the previous company employees by the
management. Therefore, it could have eliminated the rehiring of the former employees
who assisted the management in carrying out the fraudulent activities (Williams, 2011).
Question 2: The Waste Management Scandal Summary of the Scandal The Waste
Management Inc.
fraud scandal which took place in the late 90s also form part of the major accounting
fraud or corporate scandals ever recorded in history. The scandal involved the inflation
of the organization’s profits. Furthermore, the organization concealed more than $1.7
billion. Most of the members of the organization took part in the fraudulent activity and
gained millions from them. Waste Management Inc.
also misrepresented its expenses, causing an appreciation of the value stated in their
books instead of a depreciation. Most of the entity’s expenses were concealed or
wrongly represented in the financial statements. The fraud was perpetrated by the
company executives including the CEO, who gave instructions on the earnings to be
represented, and the CFO, who concealed the evidence of the fraud.
The corporation controller manipulated the accounts to meet the set profit targets,
while the general counsel approved of the fraudulent representations (Sift Media, 2002).
The Ability of Sarbanes-Oxley to Prevent the Scandal The Sarbanes-Oxley was faced with
the same issues as that of Phar Mor. For this reason, the SOX had the capacity to deal
with this fraudulent acts. SOX could have attempted to stop these acts among the
company leaders.
However, considering the high involvement of these managers in the fraud, they may
have continued to act inappropriately. With the help of the SOX, nonetheless, the fraud
may have been exposed sooner, preventing further effects of these crimes on the
organization’s stakeholders (Sift Media, 2002).
Question 3: The Enron Scandal Summary of the Case The Enron Energy Company
scandal is one of the largest accounting fraud cases to be recorded in the 21st century.
The corporate scandal came to light in 2001 after the company was declared bankrupt
followed by the launching of criminal investigations by the Justice Department. The fall
of the business enterprise began in 2000.
The Chief Executive Officer of the entity, Jeffrey Skilling together with the CFO, Andrew
Fastow, had devised a means for hiding the losses incurred by the enterprise. The
company’s Chairman, Kenneth Lay, also participated in this fraudulent activity. The fraud
was committed using the mark-to-market accounting technique. With this approach, the
company measured the value of its assets using the market value rather than the book
value.
The management will acquire new assets and immediately claim the forecasted profits
on its financial statements. In case the asset earned fewer profits compared to the
forecasted amount, the management would transfer it to an off-the-books business
entity (Special Purpose Entity or SPE). This enabled the enterprise to write off those
business operations which were hurting its profit margins (Li, 2010).
The Ability of SOX to Avert the Scandal If Sarbanes-Oxley could have been in effect by
the time the Enron Energy Company scandal was happening, the rules and standards
that it provides could have assisted in preventing the accounting fraud. This is so
because it could have deterred the fraudulent activities conducted by the top executive
of the company.
If the auditor of the company had been rotated, the fraud would have been prevented.
The reason is that it would have interrupted the plan devised by the management to
hide the losses. However, the drawback is that it relies on chance or the probability that
the new auditor is ready to report the fraudulent activities. References Li, Y. (2010).
The Case Analysis of the Scandal of Enron . International Journal of Business and
Management , 37-41. Sift Media. (2002, May 27). SEC sues former Waste Management
officers for fraud. Retrieved from Accounting Web:
https://www.accountingweb.com/aa/auditing/sec-sues-former-waste-management-offic
ers-for-fraud Williams, S. L. (2011). The Case of Phar-Mor Inc.: Could SOX Have
Prevented the Fraud? The CPA Journal , 58-63.
INTERNET SOURCES:
——————————————————————————————-
1% – https://www.termpaperwarehouse.com/essay-on/Din-Mor/237538
<1% - https://ar.scribd.com/document/100542691/barclz
1% – https://www.scribd.com/document/307145340/Operational-Audit
1% –
http://www.scoop.it/t/devry-papers/p/4035746133/2015/01/22/acct-525-week-1-assign
ment-the-case-of-phar-mor-in
1% –
<1% - https://www.sec.gov/news/testimony/090903tswhd.htm
<1% - https://es.scribd.com/doc/257358018/IIA-CIA-Fraud-Risks-and-Controls
1% – https://studentshare.net/essays/Enron?page=4
<1% - https://wikivisually.com/wiki/MCI_Inc.
<1% -
https://www.homeworkmarket.com/sites/default/files/qx/15/11/31/05/blaw_ebook._v1.p
df
<1% - http://www.thefullwiki.org/Enron_scandal
<1% - http://www.thebusinessplanstore.com/business_valuations.htm
1% – https://www.inc.com/encyclopedia/sarbanes-oxley.html
2% – http://maaw.info/TheCPAJournal-4.htm
Plagiarism Checker X Originality Report
Similarity Found: 10%
Date: Friday, January 05, 2018
Statistics: 86 words Plagiarized / 896 Total words
Remarks: Low Plagiarism Detected – Your Document needs Optional Improvement.
——————————————————————————————-
Question 1: The Case of Phar-Mor Inc. Summary of the Case The Phar-Mor Inc. scandal
presented one of the largest accounting fraud cases. Many people were involved in the
scandal which makes it unclear whether it could really have been averted. An
investigation of the company indicated that it had fictitious inventory.
In addition to this, there were fund diversions as well as fraud cover-ups conducted by
the executive of the company. This cost the investors millions of dollars. The initial sign
that the company was running into financial hurdles was seen in 1988 when the
investigations showed that the company was receiving lower-than-expected profit
margins. This was as a result of the company being billed of for the stock/inventory that
it had not received from Tamco (Its sister company and primary supplier).
Phar-Mor Inc. was not keeping accurate records regarding the purchases of stock from
Tamco. Therefore, the business entity’s profit margins were negatively affected due to
the missing inventory (Williams, 2011). SOX Ability to Prevent the Phar-Mor Fraud Case
SOX could have effectively averted the fraud.
To start with, section 203 of the Sarbanes-Oxley (Title II, Audit Partner Rotation) could
have ensured that the auditor is rotated. Therefore, there is a possibility that the new
auditor would have participated in the fraud. In addition to this, the rules provided in
section 206 of the SOX (Title II, Conflicts of Interest), could also have assisted in
preventing the fraud.
The section prevents the rehiring the of the previous company employees by the
management. Therefore, it could have eliminated the rehiring of the former employees
who assisted the management in carrying out the fraudulent activities (Williams, 2011).
Question 2: The Waste Management Scandal Summary of the Scandal The Waste
Management Inc.
fraud scandal which took place in the late 90s also form part of the major accounting
fraud or corporate scandals ever recorded in history. The scandal involved the inflation
of the organization’s profits. Furthermore, the organization concealed more than $1.7
billion. Most of the members of the organization took part in the fraudulent activity and
gained millions from them. Waste Management Inc.
also misrepresented its expenses, causing an appreciation of the value stated in their
books instead of a depreciation. Most of the entity’s expenses were concealed or
wrongly represented in the financial statements. The fraud was perpetrated by the
company executives including the CEO, who gave instructions on the earnings to be
represented, and the CFO, who concealed the evidence of the fraud.
The corporation controller manipulated the accounts to meet the set profit targets,
while the general counsel approved of the fraudulent representations (Sift Media, 2002).
The Ability of Sarbanes-Oxley to Prevent the Scandal The Sarbanes-Oxley was faced with
the same issues as that of Phar Mor. For this reason, the SOX had the capacity to deal
with this fraudulent acts. SOX could have attempted to stop these acts among the
company leaders.
However, considering the high involvement of these managers in the fraud, they may
have continued to act inappropriately. With the help of the SOX, nonetheless, the fraud
may have been exposed sooner, preventing further effects of these crimes on the
organization’s stakeholders (Sift Media, 2002).
Question 3: The Enron Scandal Summary of the Case The Enron Energy Company
scandal is one of the largest accounting fraud cases to be recorded in the 21st century.
The corporate scandal came to light in 2001 after the company was declared bankrupt
followed by the launching of criminal investigations by the Justice Department. The fall
of the business enterprise began in 2000.
The Chief Executive Officer of the entity, Jeffrey Skilling together with the CFO, Andrew
Fastow, had devised a means for hiding the losses incurred by the enterprise. The
company’s Chairman, Kenneth Lay, also participated in this fraudulent activity. The fraud
was committed using the mark-to-market accounting technique. With this approach, the
company measured the value of its assets using the market value rather than the book
value.
The management will acquire new assets and immediately claim the forecasted profits
on its financial statements. In case the asset earned fewer profits compared to the
forecasted amount, the management would transfer it to an off-the-books business
entity (Special Purpose Entity or SPE). This enabled the enterprise to write off those
business operations which were hurting its profit margins (Li, 2010).
The Ability of SOX to Avert the Scandal If Sarbanes-Oxley could have been in effect by
the time the Enron Energy Company scandal was happening, the rules and standards
that it provides could have assisted in preventing the accounting fraud. This is so
because it could have deterred the fraudulent activities conducted by the top executive
of the company.
If the auditor of the company had been rotated, the fraud would have been prevented.
The reason is that it would have interrupted the plan devised by the management to
hide the losses. However, the drawback is that it relies on chance or the probability that
the new auditor is ready to report the fraudulent activities. References Li, Y. (2010).
The Case Analysis of the Scandal of Enron . International Journal of Business and
Management , 37-41. Sift Media. (2002, May 27). SEC sues former Waste Management
officers for fraud. Retrieved from Accounting Web:
https://www.accountingweb.com/aa/auditing/sec-sues-former-waste-management-offic
ers-for-fraud Williams, S. L. (2011). The Case of Phar-Mor Inc.: Could SOX Have
Prevented the Fraud? The CPA Journal , 58-63.
INTERNET SOURCES:
——————————————————————————————-
1% – https://www.termpaperwarehouse.com/essay-on/Din-Mor/237538
<1% - https://ar.scribd.com/document/100542691/barclz
1% – https://www.scribd.com/document/307145340/Operational-Audit
1% –
http://www.scoop.it/t/devry-papers/p/4035746133/2015/01/22/acct-525-week-1-assign
ment-the-case-of-phar-mor-in
1% –
<1% - https://www.sec.gov/news/testimony/090903tswhd.htm
<1% - https://es.scribd.com/doc/257358018/IIA-CIA-Fraud-Risks-and-Controls
1% – https://studentshare.net/essays/Enron?page=4
<1% - https://wikivisually.com/wiki/MCI_Inc.
<1% -
https://www.homeworkmarket.com/sites/default/files/qx/15/11/31/05/blaw_ebook._v1.p
df
<1% - http://www.thefullwiki.org/Enron_scandal
<1% - http://www.thebusinessplanstore.com/business_valuations.htm
1% – https://www.inc.com/encyclopedia/sarbanes-oxley.html
2% – http://maaw.info/TheCPAJournal-4.htm
