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Recent Accounting Scandals

Uploaded by mfields on Apr 28, 2004

Financial Reporting Ethics

Adelphia
1. John Rigas, other Rigas family members, Michael Mulcahey
2. Adelphia backed off-the-book loans for the Rigas family totaling 3.1 billion dollars. The company also overstated earnings and purchased luxury items for the Rigas family.
3. Companies are supposed to serve the stockholders interests and not the founder’s interests. The Rigas family illegally used the money and the resources of the company for their own gain.
4. Money was stolen from the business and the stock price fell and was taken off the charts.
5. The Rigas family wanted to use the company resources for their own gain and were helped by people in the company.
6. Shareholders had money stolen from them and lost money when the stock price fell.

Arthur Anderson
1. David B. Duncan
2. Signed off on Enron’s faulty accounting and then shredded related documents after the SEC launched an investigation into Enron’s accounting.
3. An auditor must look at a companies financial statements objectively. It is also illegal to destroy information that is part of an investigation.
4. Arthur Anderson and Enron went out of business.
5. Anderson knew if they confronted Enron about their faulty accounting they would lose their account.
6. Arthur Anderson went out of business and their employees had to find jobs elsewhere. Owners of stock in Enron and Arthur Anderson lost money.

Enron
1. CEO Kenneth Lay, CFO Andrew Fastow
2. Inflated profits with off-the-books partnerships. Illegally manipulated the energy markets in Texas and California.
3. Enron fraudulently made it appear that they were making more money than they actually were. They also forced energy prices up using questionable and in some cases illegal methods.
4. Enron filed the largest bankruptcy in history and took their auditor, Arthur Anderson down with them. Their collapse brought the stock market down and brought the accounting practices of many other companies under scrutiny.
5. Management wanted to increase profits and Enron’s stock price using any and every method available.
6. Employees lost their life savings in 401k plans. All stockholders lost money.


Global Crossing
1. Ex-CEO Robert Annunziata
2. Inflated revenue by swapping network capacity with other providers. Provided excess compensation to management.
3. Swapping contracts made it look like Global Crossing was doing more business than they actually were. Their CEO contract was also criticized by many for giving too much compensation to the CEO, this may have been a result of a lack of proper corporate governance.
4. Global Crossing went out of business.
5. Management wanted the company to look more attractive to investors.
6. Stockholders and employees.

HealthSouth
1. Chairman and CEO Richard Scrushy, CFO William T. Owens
2. Overstated earnings by 1.4 billion dollars.
3. Not adhering to GAAP, fraud.
4. Company stock price...

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Uploaded by:   mfields

Date:   04/28/2004

Category:   Accounting

Length:   3 pages (729 words)

Views:   13866

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