Accounting fraud essay
In In order to win in the universe of deep price reduction. So for the following two old ages. Monus dedicated Phar-Mor to undercuting Wal-Mart. Chief Financial Officer Pat Finn watched nervously as. By he realized Phar-Mor now faced a loss of million. This put Mickey Monus in a tough place. What had seemed a white-hot company in a sizzling industry was losing money.
He merely had a twosome of options.
(DOC) Financial Fraud Essay | Karanja K Wambui - turtsupptrocfacse.tk
Accounting fraud can result in creditors and stockholders losing confidence…. Furthermore, revenue recognition is often prey to financial fraud. Login Join.
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Open Document. Question 1 a Earnings management Earnings are major role in financial report and have great impacts on the prospect of a company. Therefore, managing the earnings will become the main issue. Healy and Wahlen stated that Earnings management EM occurs when manager use their discretion to alter accounting numbers in financial reporting, with the intention of mislead some stakeholder about business performance and affect contractual outcomes.
In addition, EM will happened in any part of the external disclosure process with intention to achieve some private gain Xu et al, The incentive of meet capital market expectation is created by external investors and financial analysts, they widespread use of accounting information to help value stock of a company.
Inversely, if the firm report growth continuously in annual earnings, it may get a premium price than other firms Barth et al, The Chief Executive Officer CEO encouraged staff to bring as much as revenue in the door, regardless the long-term costs of a project exceeds short-term gains.
However, due to reduced demand for telecommunication service, increased competition, and the aftermath of the dot-com bubble collapse, the company struggled for maintained its target revenue and price. In order to achieve its targeted performance, the Chief Financial Officer CFO and his staff decided to use two accounting tactics which were accrual releases and expense capitalisation. The company used to accrual the expense to a liability account for the future payment first, and then reduce liability accrual when the company paid the bills by cash.
However, due to the high relative future cash payment, the CFO told staff to release accruals. Scandal at WorldCom 2.
Facts According to several articles discussing the WorldCom scandal, we find that this fraudulent happened due to support from the corporate managements. WorldCom executives committed accounting fraud that pushed the company to be the largest bankruptcy in the US. In June , there were stakeholders that do prosecution against WorldCom but it was elapsing due to lack of evidences. Ethical Guidelines.
WorldCom scandal represents the biggest mistake in American business. WorldCom was proven to violate many ethical guidelines by committing insincerity in providing financial figures to stakeholders and public; some of the violation are as following: Customer commitment Ought to be a big company, WorldCom must hold the trust given by customers by delivering good services. After WorldCom Bankruptcy, stakeholders and investors had low confidence towards financial statement of corporations that caused the slow growth of stock markets.
Who Was Affected?
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The bankruptcy of WorldCom presents a domino effect in all of sector, especially at stocks market and telecommunication services. When WorldCom announced their bankruptcy, share price of Nokia, Sony Ericsson, Vodafone, Alcatel and other telecommunication companies experienced a significant downturn. For example, share price of Nokia experienced five-percent decline, Sony Ericsson descended nine percent, and Vodafone descended 17 percent.
Meanwhile, Alcatel experienced heaviest blow by descending 17 percent momentary gratuities after announcing of expense amputation meaning employees reduction.