pre-SOX case study of financial statement fraud
Please refer to these resources for this discussion:
- Chapters 11, 12, and 13 in the Albrecht textbook
- Financial Statement Fraud (Crazy Eddie’s) video – located in the Course Documents folder under ACFE videos
- Smartest Guys in the Room – Enron documentary – located in the Course Documents folder
This week, we had the opportunity to explore some of the more egregious financial statement frauds from the past two decades. Many of these occurred prior to the enactment of Sarbanes Oxley (Enron, Worldcom, Waste Management, Adelphia, Tyco, Healthsouth, Qwest Communications, Cendant, and others). Other cases of financial statement fraud have surfaced after SOX was enacted, including Lehman Bros. and Fannie Mae.
For this week’s discussion, choose one of the pre-SOX financial statement fraud cases and write a brief summary (1 – 2 paragraphs) that outlines:
- What happened?
- Who was involved?
- How did they do it?
- How were they caught?
- What were the results (for both the victims and the perpetrators)?
In addition to this summary, write a brief evaluation of how you think SOX might have impacted and/or changed your case study. Would it have still been likely to occur? Would it have been reduced in severity or duration? How might it have changed things for the victims? the perpetrators? For this part, I recommend that you refer to Appendix A at the end of Chapter 11 in the textbook (p. 397) and the discussion that ensues there, including the consideration of the Fraud Triangle presented in Table 11A.1 (p. 406). Would SOX have made a difference in your chosen case? If so, how? If not, why not?
There are, of course, widely varied opinions of the effectiveness of SOX. Kayla Gillan, a former deputy chief of staff to the Chairman of the SEC, believes that SOX has been a beneficial and successful new law. She believes that, while no legislation can entirely eliminate financial statement fraud, SOX has been effective in rapidly increasing investor confidence. Despite acknowledging that SOX has increased the cost of participating in capital markets, she stated that many believe that the benefits far outweigh the increased costs. She believes that internal controls are more effective, auditor standards are more stringent, auditors are more competent and engaged, and the SEC has become more effective. She believes that the purpose of SOX legislation was to enhance investor protection and that it has largely accomplished this.
On the other hand, there are those that believe that SOX has largely been a failure. Billionaire investor Mark Cuban, when considering the SEC and the experiences of startup companies, feels that SOX has made it much more difficult for companies to go public because of the increased costs associated with SOX. There are many more opinions on both sides of this argument. When it comes to preventing and reducing financial statement fraud, what do you think? Has SOX been a help or a hindrance?
In summary, for this discussion (per the guidelines above):
- Write a 1-2 paragraph summary of a pre-SOX case study of financial statement fraud (15 pts.)
- Write a brief evaluation of how you think SOX might have impacted and/or changed your case study (15 pts.)
- Discuss whether SOX has been successful in reducing financial statement fraud. (10 pts.)
- Post at least two substantive responses to other student posts (10 pts.)
Note: The discussion has been formatted so that you will not see any other posts until you have uploaded your initial post.
This discussion will end Friday, 4/19 at midnight and all posts are due before then. Early participation improves the value of the discussion for everyone, so please post your initial contributions early (no later than 4/14). Waiting until the end to post will result in fewer points awarded.
Enjoy the discussion and see you in the discussion forum!
Gillian, Kayla. “Sarbanes-Oxley Has Enhanced Investor Protection.” The New York Times. N.p., 24 July 2012. Web. 12 Apr. 2016.
Berman, Dennis. “What Mark Cuban Would Do If He Ran the SEC.” WSJ. The Wall Street Journal, 27 Oct. 2015. Web. 12 Apr. 2016.
access to the chapters you will need to go to https://www.cengage.com/dashboard/#/my-dashboard/a…
jasminejabro is username and password is Jabro34313 then click on my dashboard and click on the fraud examination and it should be on the right with a picture of a book that says full book
https://blackboard.sdsu.edu/bbcswebdav/pid-4660158… this link is for Financial Statement Fraud (Crazy Eddie’s) video – located in the Course Documents folder under ACFE videos
log in 821583003
https://blackboard.sdsu.edu/bbcswebdav/pid-4779299 Smartest Guys in the Room – Enron documentary – located in the Course Documents folder
log in 821583003
once you send me my response i will post it and send you 2 others so you can write a very short 50-100 word response to theirs.
i believe he’s asking for 3-4 paragraphs on each topics! if i get the chance to send you students examples i will!