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Accounting scandals

Accounting scandals: Encyclopedia - Accounting scandals

Accounting scandals, or corporate accounting scandals are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations. Such misdeeds typically involve complex methods for misusing or misdirecting funds, overstating the value of corporate assets or underreporting the existence of liabilities, sometimes with the cooperation of officials ...

Including:

Accounting scandals - Scandals

Accounting scandals - Big Five accounting auditors

Accounting scandals - Accounting scandals by year first reported

Accounting scandals - 2002

Accounting scandals - Later scandals

Accounting scandals - Outcomes

Accounting scandals, Accounting scandals - 2002, Accounting scandals - Accounting scandals by year first reported, Accounting scandals - Big Five accounting auditors, Accounting scandals - Later scandals, Accounting scandals - Outcomes, Accounting scandals - Scandals, Corporate abuse, Corporate scandal, Savings and loan crisis

Accounting scandals: Encyclopedia - Accounting scandals

Accounting scandals

Accounting scandals, or corporate accounting scandals are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations. Such misdeeds typically involve complex methods for misusing or misdirecting funds, overstating the value of corporate assets or underreporting the existence of liabilities, sometimes with the cooperation of officials in other corporations— (Morgan Stanley), or affiliates.

In public companies, this type of "creative accounting" can amount to fraud and investigations are typically launched by government oversight agencies, such as the Securities and Exchange Commission (SEC) in the United States.

In 2002, a wave of separate but often related accounting scandals became known to the public in the U.S.. Several leading public accounting firms—Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG, PricewaterhouseCoopers, and others—have admitted to or have been charged with negligence in the execution of their duty as auditors to identify and prevent the publication of falsified financial reports by their corporate clients which had the effect of giving a misleading impression of their client companies' financial status. In several cases, the monetary amounts of the fraud involved are in the billions of dollars USD.

Accounting scandals - Scandals

Accounting scandals - Big Five accounting auditors

(Auditors i.e. accounting firms are listed, followed by their related clients.)

Arthur Andersen -- CMS, Cornell, Dynegy, Enron, Global Crossing, Halliburton, Martha Stewart Omnimedia, Merck, Peregrine, Qwest, Sunbeam, Waste Management, WorldCom
- David Duncan
Deloitte & Touche -- Adelphia, AES, Cendant, Duke, El Paso, Merrill Lynch, Reliant, Rite Aid, Parmalat
Ernst & Young -- AOL Time Warner, Dollar General, PNC
KPMG -- Citigroup, CA, GE, IM Clone, Peregrine, Xerox
PricewaterhouseCoopers -- Bristol Myers, HPL, JP Morgan Chase, Kmart, Lucent, MicroStrategy, Network Associates, NKFS, Tyco
Coopers & Lybrand LLP -- Network Associates, Phar-Mor
Gutierrez & Co. -- Vivendi
Grant Thornton -- Parmalat

Corporate abuse, Corporate scandal, Savings and loan crisis

Accounting scandals - Accounting scandals by year first reported

MiniScribe (1989)
- Q. T. Wiles
Cendant (1998)
Xerox (2000)
One.Tel (2001) (Australia)
Enron ((2001 - Jeffrey Skilling, Kenneth Lay, Andrew Fastow)

Accounting scandals - 2002

(Client companies are listed, followed by their prominent executives, known to be culpable in committing fraud)

AOL
Adelphia
Bristol-Myers Squibb
CMS Energy
Computer Associates
Duke Energy
Dynegy
El Paso Corporation
Freddie Mac
Global Crossing
- Gary Winnick, John Legere, Thomas Casey
Halliburton
Harken Energy (Published report 10-9-2002)
HealthSouth
Homestore.com
ImClone Systems (Sam Waksal, Martha Stewart, John B. Landes, Ronald A. Martell)
Kmart
Lucent Technologies
Merck & Co.
Merrill Lynch
Mirant
Nicor Energy, LLC
Peregrine Systems
Qwest Communications International
Reliant Energy
Sunbeam
Tyco International (L. Dennis Kozlowski, Mark H. Swartz)
Waste Management
WorldCom (Bernard Ebbers)

Accounting scandals - Later scandals

Parmalat (2003)
- Calisto Tanzi (2003)
AIG (2005)

Accounting scandals - Outcomes

The Enron scandal has so far resulted in the criminal conviction of the Big Five auditor Arthur Andersen, and that firm has had to divest itself of its non-US partners.

There is a general perception that there are other accountancy scandals waiting to be uncovered, which has contributed to the 2002 stock market downturn.

On July 9, 2002 George W. Bush gave a speech about recent accounting scandals that have been uncovered. In spite of its stern tone, the speech did not focus on establishing new policy, but instead focused on actually enforcing current laws, which include holding CEOs and directors personally responsible for accountancy fraud.

In July, 2002, WorldCom filed for bankruptcy protection, in the largest corporate insolvency ever.

These scandals have reignited the debate over the relative merits of US GAAP, with its rules-based approach to accounting, versus International Accounting Standards and UK GAAP, which favour a principles-based approach. The Financial Accounting Standards Board has announced it intends to introduce more principles-based standards. More radical means of accounting reform have been proposed but so far have very little support.

In 2005, after a scandal on insurance and mutual funds the year before, AIG is under investigation for accounting fraud. The company already lost over 45 billion US dollars worth of market capitalisation because of the scandal. This was the fastest decrease since the WorldCom and Enron scandals. Investigations also discovered over a billion US dollars worth of errors in accounting transactions. Future outcome for the company is still pending.