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• eBook-Kapitel aus dem Buch Accounting Fraud

  A Practice Aid for Auditors: Fraud Interviews – An Inquiry Guide

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …Appendix: Practice Aids 297 Appendix II A Practice Aid for Auditors: Fraud Interviews – An Inquiry Guide Of… …plan and perform every audit with an increased focus on professional scepticism in gathering and evaluat- ing audit evidence. All members of the audit… …Officer / Chief Ethics Officer – Has the company established an ethics code? If so, how was it introduced? Is it a helpful guidance on ethical… …of possible inappropriate changes to estimates, of the failure to consider appropriately all relevant information in determining an estimate, or of… …possible override of controls related to an estimate? Have you ever been told to change an estimate or accounting treatment without an explanation? If so… …any instances where an unauthorized individual gained access to the accounting system? If so, how was the situation resolved? – If someone wanted… …year? Are you aware of any unusual sales terms or conditions associated with sales near the end of the fiscal year? – If an employee was falsifying… …acquire. Each response has to be evaluated: is it relevant, valid and complete? The aim of an interview is getting fraudsters to reveal more than they… …intend. One of the most difficult phases is often commencing an interview. The experi- enced interviewer begins by asking easy, non-sensitive questions… …the process. The body has trouble remaining still. – They subconsciously cross their arms as if to protect themselves from an…

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  Case 7: Waste Management (1997)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …Accounting Fraud in U.S. Companies 55 Case 7: Waste Management (1997) The Waste Management case provides an anatomy of an accounting… …portrays an accounting fraud perpetrated by the highest-ranking officers at WMI. As the scheme unravelled in 1997, the news sent WMI’s stock value tumbling… …material and that Andersen could issue an unqualified audit opinion on the com- pany’s 1993 financial statements. In 1994, WMI continued to engage in the ac-… …client”. It indicated that WMI actively managed re- ported results, had a history of making significant fourth quarter adjustments, and was in an industry… …agement’s netting of the gains and charges and the lack of disclosures. We have communicated strongly to management that this is an area of SEC exposure. We… …company had previously worked as an auditor at Andersen. – During the 1990s, 14 former Andersen employees worked for WMI, most often in key financial… …typed up an agreement that laid out 32 changes in prac- tices that WMI would have to undertake over time to make its finances more truth- ful. The signed… …complaint, WMI and its outside auditor constituted an agreement to cover up past frauds by committing additional frauds in the future. The SEC believed that… …management consistently refused to make these adjustments. Instead, WMI secretly entered into an agree- ment with Andersen to write off the accumulated… …paid by an audit firm in an enforcement action brought by the SEC. Besides, three audit partners were fined individually. Some believe that Andersen…

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  Case 24: AIG (2005)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …in an industry that was inherently volatile. Investors marvelled at what appeared to be AIG’s uncanny abil- ity to underwrite complicated and unusual… …risks without ever misjudging them. Greenberg often said that AIG had never experienced an underwriting loss (which occurs when an insurer… …of the most precious prizes in all of business: an AAA rating, held by no more than a dozen companies in the United States. However, in March… …2005, Greenberg was forced to step down as AIG’s chief executive amid an accounting scandal that led to multiple state and federal investi- gations… …that AIG had increased its general loss reserves, when in fact it had not – A deal with an offshore special purpose entity called Capco Reinsurance Co… …loss reserves added to its balance sheet, AIG’s re- ported loss reserves would have been USD 250 million lower in the fourth quarter of 2000 and an… …General Eliot Spitzer. “And yet, top management routinely and persistently resorted to deception and fraud in an apparent effort to improve the company’s… …, in August 2009, the SEC announced an agreement with Greenberg to settle the accusations that he oversaw the accounting fraud at AIG. The SEC com-… …he acted unlawfully. He agreed to pay a USD 1.5 mil- lion fine in order to settle fraud charges. Besides, he was prohibited from acting as an officer… …received an 80% stake in the insurance giant. References: Biegelman, Martin T. / Bartow, Joel T.: Executive Roadmap to Fraud Prevention and…

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  A Practice Aid for Company Executives: The Ethics Barometer

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …management team have a clear picture of the ethi- cal issues occurring at all levels of the organization. But to develop a sophisticated understanding of an… …confidential questionnaire among staff that measures the extent to which unethical conduct occurs within an organization, and what employee atti- tudes are… …, everyone takes the existing stan- dards of conduct seriously. B.5 In my immediate working environment, an atmosphere of mutual trust pre- vails… …German) KPMG: The Integrity Thermometer – A diagnostic instrument for measuring and developing an organization’s ethics and integrity, www.kpmg.be, 2009…

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  Case 2: ZZZZ Best Company (1987)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …teen-age millionaire. But only a few people saw, or wanted to see, that his business scarcely existed. The story of Barry Minkow is an insightful account… …of how an amoral individual still in his teens was able to sell what one journalist called a “hologram” of a corporation to Wall Street. Barry… …on the back of the Internet boom. Within weeks, ZZZZ Best shares soared from an initial offering of USD 4 to USD 18. Barry Minkow retained a 53%… …controlling interest in ZZZZ Best, and this made him an instant multi-millionaire on paper. By March 1987, Minkow’s shares were worth USD 64 million, and a… …to take a company public in American financial history. During an appear- ance on the Oprah Winfrey Show in April 1987, Minkow encouraged his peers to… …, Minkow dis- missed the auditor and engaged Ernst & Whinney, an international public account- ing firm (now part of Ernst & Young) to perform the following… …. And he fooled the auditors with an act that seemed like Hollywood: he rented half-finished buildings, fixed them up to look like ZZZZ Best work sites… …New York. Eventually, an independent law firm asked for the addresses to all of the company’s restoration jobs. Minkow realized that he could not… …reported USD 100 million. In July 1987, just three months after the company’s stock had reached a market value of nearly USD 220 million, an auction of its… …lawyer portrayed him as an immature teen-ager, who hoped to im- press girls and got involved with the wrong people. For his part, Minkow contended he was…

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  Case 29: Infomatec (Germany, 2000)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …Accounting Fraud in European Companies 177 Case 29: Infomatec (Germany, 2000) Infomatec, an Augsburg-based maker of interactive TV… …fictitious large-scale orders. For example, in May 1999, at the peak of the new-economy bubble, Infomatec published an ad-hoc-disclosure, announcing the… …ad-hoc-disclosures are by no means intended only for an investment and sector-specialized audience, but rather for all present or potential investors and… …a competitor and simply garnished with an Infomatec logo. Finally, the company’s core software product allegedly never possessed many of the… …characteristics and functionalities professed in the prospectus and corporate literature. In September 2000, the district attorney’s office began an official… …of an important development. For the first time in Germany, the board members of a cor- poration were held personally liable for supplying…

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  Case 22: Symbol Technologies (2004)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …Accounting Fraud in U.S. Companies 144 Case 22: Symbol Technologies (2004) To the outside world, Symbol Technologies, Inc. was an icon of… …its scope.” The investigation of fraud at Symbol began in April 2001 with an anonymous letter sent to the SEC. The letter described two specific… …145 – They received substantial price discounts, guaranteeing a huge profit in case of a resale to an end user, or direct cash payments disguised… …pledge to buy back unsold products and pay the reseller an addi- tional amount (“the candy”) for cooperating. The SEC said that the candy – equal to 1% of… …revenue had to be inflated and expenses hidden so that the company could hit its quarterly sales and earnings targets. The process was considered an artful… …took large non-recurring charges in connection with an acquisi- tion and the relocation of manufacturing operations. These charges were fraudulent as… …. He fostered an aggressive “numbers driven” corporate culture obsessed with meeting financial pro- jections. To boost the company’s stock price, he… …litigation, brought separately against the company, Symbol paid USD 98 million. An additional USD 3 million went to the U.S. Postal Inspection Service…

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  Case 12: Enron (2001)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …complex transac- tions and accounting issues. U.S. Senator John Dingell commented: “What we are looking at here is an example of superbly complex financial… …originated a strong reaction (possibly an overreaction) from the regulatory bodies as well. Thus, it is of great importance to understand what actually… …Enron from a natural gas supplier into a gas-trading company that served as an intermediary between producers and end users. In a deregulated natural… …of the rapid transformation from a sleepy bricks-and-mortar pipeline business into an energy-trading juggernaut, Enron was rated for several… …, an Enron vice president of corporate development, wrote a letter to Kenneth Lay expressing concerns about the firm’s accounting. She described her… …Andersen, so the matter could be investigated further. October - An Arthur Andersen lawyer reminded a senior audit partner that company policy was not to… …million in losses from 1997 to 2000 as well as an additional USD 658 million in liabilities for 2000 (November 8). - Enron entered a merger agreement with… …the proposed merger (November 28). - The stock closed at an astonishing 26 cents a share (November 30); just fifteen months previously the shares had… …hit an all-time high of USD 90.56. December Enron filed for Chapter 11 bankruptcy protection in New York, with stated balance sheet debt of USD 13… …been the result of an elaborate accounting hoax orchestrated by the company’s most senior executives. For years, Lay and Skilling had deceived…

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  Case 38: Daewoo Group (South Korea, 1999)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …failures that later plagued many leading companies around the world. However, Daewoo’s warnings signs were dismissed as an aberration limited to a distant… …business-government partnership that lifted South Korea from poverty to an industrial power, the gov- ernment ensured that Kim got almost as much credit as he wished… …would sell an asset far above current value to an affiliated entity, and book the capital gain as profit. Government lawyers said the assets were actu-… …documents to create an import transaction that never occurred. According to the prosecutors, the group diverted an additional USD 1.5 billion to the BFC… …for personal enrichment by Kim and senior Daewoo managers. Accounting Fraud in Asian Companies 229 Daewoo was not an isolated incident; a… …manner in which it was conducted and the way in which it lasted undetected until the end. An economic adviser to President Kim Dae Jung said much of what… …Korea after six years as an international fugitive. He had lived like a criminal on the run, allegedly dividing his time between Asia and Europe, but… …approximately USD 20 billion in Daewoo funds, Kim claimed that the BFC was “an official organization to manage financial resources abroad more efficiently.”… …a “locomotive” for South Korea’s economic growth. He said Kim’s legen- dary “diligence and passion” had set an example for millions of South Koreans… …. The court’s penalty seemed to reflect an emerging hard line among Korean judges, who had often been accused of being too lenient on business executives…

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  Case 34: Royal Ahold (The Netherlands, 2003)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …rocked Ahold, and many critics insisted that the Dutch royal fam- ily rescind the company’s “Royal” designation. “This is pretty big,” said an analyst in… …rigorous performance standards that were imposed on Ahold’s domestic operations. During the 1990s, CEO Cees van der Hoeven had established an overall… …figures shocked Ahold’s new management as much as it did analysts and investors. The company immediately authorized an investigation by law firm White &… …(like many others) did not have a systematic method of accounting for these allowances. The absence of proper internal controls provided an excellent… …at the end of an accounting period). USF executives also provided Ahold’s independent auditors with false and mis- leading information by, for… …confirmations is an important part of the audit process, and the Commission will hold accountable those who work to subvert it.” The USF case was the largest… …USF was “very opaque”. An SEC spokesperson commented: “These auditors had evidence in their hands that could have stopped the fraud in its tracks… …testimony. But Ahold also conducted an extensive internal investigation and even expanded it beyond the fraud at U.S. Foodservice and the improper joint… …venture accounting. The company voluntarily analyzed accounting practices and internal controls at 17 operating units. An SEC enforcement official said… …: “This case is an example of the clear corporate advantage to conducting a comprehensive internal investigation and fully cooperating with the…

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