Question

Background: Accounting scandals and fraud, both in the United States and internationally, have re-ignited the debate over the current laws, regulation and accounting principles. The relative merits of GAAP, which takes a “rules-based” approach to accounting, versus IFRS, which takes a “principles-based” approach have been under scrutiny. In the last couple of years, the FASB announced that it intends to introduce more principles-based standards to improve general accounting principles and practices.

Organizations have internal control measures to detect fraud. In additions, organizations are subjected to required reporting of financial information to external entities. With that in mind, answer the following items in your initial discussion response:

1. Define fraud and discuss the three factors identified in our textbook that contribute to fraudulent activity.
2. What are some strategies in health care to prevent financial fraud? Provide some details.
3. Identify an example of an organization that has committed fraud. What happened and what were the legal ramifications?

Make sure your initial response contains 175- to 265-words.

APA Formatting: Use citations where appropriate and list references.

Answer 1

FRAUD conjointly called Deception, Double-Dealing, Subterfuge, Trickery , which implies associate degree act or practices of 1 WHO deliberately deceives. it's cheating or just military science resource. Fraud in our context here is additional implying concerning ACCOUNTING / monetary FRAUD with reference to accounting principles or rules. Accounting Fraud is outlined because the intentional manipulation of monetary records or statements. corporations typically commit accounting fraud to create it seem that their business's monetary health is best than extremely it's. this will even be aforementioned as WINDOW DRESSING in auditing terms. what is more, it involves associate degree worker , comptroller or organization itself dishonest investors and shareholders. so accounting fraud is that the black-market alteration of a company's monetary statements so as to control a company's apparent health or to cover profits or losses.

Following factors will contribute to such frauds:

1) OVERSTATING REVENUE

2) UNRECORDED EXPENSES

3)MISSTATING ASSETS AND LIABILITIES , let's perceive every of those very well.

1) Overstating Revenue : let's perceive this with associate degree example, suppose company XYZ Ltd is acquisition losses and its troublesome to bring things back with revenues. so to decorate up this case , the firm may claim to be manufacturing additional financial gain o monetary statments than it will essentially. On its statements , the company's profits would be inflated. If the corporate overstates its revenue , it might go up the firm's share worth and build a false image of monetary health. so a corporation will commit acoounting fraud by overstating its revenue.

2) Unrecorded Expenses : this sort of accounting fraud creates a confusion of what quantity income a corporation is receiving. essentially it should be losing cash. this is often usually done by overstating company's income and understating its prices on the statement.

3) Misstating assets and liabilities : Such variety of accounting fraud happens once a corporation overstates its assets or understates its liabilities. as an example, a corporation may amplify its current assets and understates its current liabilities therey misrepresenting a company's short term liquidity. Let's take associate degree example, suppose a corporation has current assets of $3 million and its current liabilities square measure $5million . If a corporation overstates its current assets and understates its current liabilities , it would misrepresent its liquidity. the corporate may state that it's $7million current assets and $3million current liabilities. Then potential investors can tend to believe that the corporate has enough assets to hide up all of its liabilities.

Some of the ways to forestall such monetary Fraud :

Prevention is that the best manner for corporations to avoid the negative hassles and dear losses of accounting fraud. Its suggested that companies establish anonymous coverage systems wherever honest workers will offer tips about red flags.Implementing internal auditing controls is vital to quickly sight fraud and keep monetary records correct. Hiring a team of Certified Internal Auditors (CIA's) or Certified Fraud Examiners (CEF's) will facilitate with making associate degree anti-fraud work surroundings. different nice practices accustomed stop accounting fraud embody employing a system of checks and balances., adaptative bank accounts monthly, proscribing use of business credit cards and conducting unexpected money accounts. little and medium sized corporations square measure additional susceptible to fraud so a number of the measures which may be taken by them square measure : Segregating accounting duties, Knowing workers, maintaining internal controls, scrutinizing business bank accounts, auditing the books on regular basis, coaching workers to forestall such fraud, protective mastercard data, knowing business partners and obtaining professional facilitate.

ENRON SCANDAL concerned one in every of the largest bankruptcy filings within the history people that command quite $60 billion in assets. It resulted within the bankruptcy of the United States of America enery, commodities and services. It generated abundant dialogue likewise as legislation designed to enhance accounting standards and practices with long lasting repercussions within the monetary world. Enron was supported in 1985 by Kenneth Lay within the merger of 2 fossil fuel transmission corporations, Houstan fossil fuel Corporation and InterNorth, Inc; the incorporate company HNG Internorth was renamed Enron in 1986. when the law-makers adopted a series of laws to free the sale of fossil fuel within the early Nineteen Nineties, the corporate lost its exclusive rights to control its pipelines. With the assistance of Jeffrey Skilling, WHO was at the start a adviser and later became the company's Chief in operation Officier, Enron transferred itself into a merchant of energy derivatives contracts, acting as associate degree go-between between fossil fuel producers and their customers. The traders allowed the producers to mitigate the chance of energy worth fluctuations by fixing the asking price of their merchandise through a contarct negotiated by Enron for a fee. underneath Skilling's leadership , Enron before long dominated the marketplace for fossil fuel contracts and therefore the company began to generate Brobdingnagian profits on its trades. Skilling conjointly step by step modified the culture of the corporate to stress aggresive mercantilism. He employed prime candidates from MBA programs arounf the country associate degreed created an intensely competitive surroundings inside the corporate, during which the main target was progressively on closing as several money generating trades as attainable within the shortest quantity of your time. one in every of the brightest recruits was St. Andrew Faston WHO quickly rose through the ranks to become Enron's chief financial officer. Fastow oversaw the finance of the corporate through investments in progressively complicated instruments, whereas Skilling oversaw the building of its immense mercantilism operation. The market of the Nineteen Nineties helped to fuel Enron's ambitions and contributed to its rise. there have been deals to be created everyplace and therefore the company was able to produce a marketplace for something that anyone was willing to trade. It so listed spinoff contracts for a good kind of commodities- together with electricity, coal, paper and steel and even for the waether. an internet mercantilism division, Enron on-line, was launched throughout the dot-com boom and therefore the company endowed in buliding a broadband telecommunications network to facilitate high speed mercantilism.

As the boom years came to associate degree finish and Enron featured exaggerated competiton within the energy mercantilism business, the company's profits sharnk apace. harassed from shareholders, the corporate executives began to have confidence dubious accounting practices, together with a techinique called " mark-to-market accounting", to cover the troubles. Mark-to-market accounting allowed the corporate to write down unrealised future gains from some mercantilism contracts into current financial gain statements, so giving the illusion of upper current profits. what is more, the troubled operations of the corporate were transferred to alleged special purpose entities( SPEs), that square measure basically restricted partnerships created with outside corporations distributed assets to SPEs, Enron abused the apply by victimization SPEs as dump sites for its troubled assets. Transferring those assets to SPEs meant that they were unbroken off Enron's books, creating its losses look less severe than they extremely were. Ironically a number of the SPEs were go past Fastow himslef. Thorughout these years; Arthur Anderson served not solely as Enron's Auditor however conjointly as a adviser for the corporate.

The severity of things began to become apparent within the mid-2001 as variety of analysts began to poke into the small print of Enron's publically discharged monetary statements. an interior investigation was initiated following a memoranda from a corporation vice chairman and shortly the Securities and Exchange Commision (SEC) was investigation the transactions between Enron and Fastow's SPEs. because the details of the accounting frauds emerged , the stock worth of the corporate plummered from a high of $90 per share within the mid-2000 to but $1 by the top of Nov 2001, taking with it the worth of Enron employees' 401(k) pensions, that were in the main tied to the corporate stock. Lay and Skilling resigned and Fastow was dismissed 2 days when the SEC investigation started. On December a pair of, 2001, Enron filed for Chapter eleven bankruptcy protection. several Enron executives were indicated on a spread of charges and were later sentenced to jail. Arthur Hans Christian Andersen came underneath intense scrutiny and eventually lost a majority of ts shoppers. The harm to its name was therefore severe that it had been forced to dissolve itself. additionally to federal lawsuits, many civil suits were filed by shareholders against each Enron and Hans Christian Andersen.

The Scandal resulted in a very wave of latest rules and legislations designed to extend the accuracy of monetary coverage for publicy listed corporations

-------------------------------

Hope this will help, please comment if you need any further explanation, Please Encourage us by Up Voting the Answer which is Very Helpful to us. Thank You!

-------------------------------