Fraud Cases: Violations of Generally Accepted Accounting Principles (Gaap)

1081 words 5 pages
Fraud Cases: Violations of Generally Accepted Accounting Principles (GAAP)

Section

1

In July 2002 the Sarbanes-Oxley Act was passed by the U.S. Senate by a vote of 98 to 0. The bipartisan support for the legislation emanated directly from the investing public’s lack of tolerance for financial statement fraud. Not surprisingly, when formulating its post-Sarbanes technical audit guidance, the Public Company Accounting Oversight Board (PCAOB) made it clear that detecting fraud must be the focus of the audit process. Consider that in the board’s first internal control standard (Auditing Standard No. 2), fraud was mentioned 76 times. The PCAOB has continued its emphasis on detecting fraud in its revised internal control standard,
…show more content…
Most often the entries were made during the fourth quarter, and then improperly applied cumulatively from the beginning of the year. Management did not appear to disclose the changes or their impact on profitability to their investors. In a letter to the management team dated May 29, 1992, Arthur Andersen’s team wrote, “[i]n each of the past five years the Company added a new consolidating entry in the fourth quarter to increase salvage value and/or useful life of its trucks, machinery, equipment, or containers.” Andersen recommended that the company conduct a “comprehensive, one-time study to evaluate the proper level of WMNA’s salvage value and useful lives,” and then send these adjustments to the respective WMNA groups. However, top management allegedly continued to change depreciation estimates at headquarters.

Carrying Impaired Land at Cost
Because of the nature of landfills, GAAP also requires that a company compare a landfill’s cost to its anticipated salvage value, with the difference depreciated over the estimated useful life of the landfill.4 Waste Management disclosed in the footnotes to the financial statements in its annual reports that “[d]isposal sites are carried at cost and to the extent this exceeds end use realizable value, such excess is amortized over the estimated life of the disposal site.” However, in reality, the SEC

Related

  • Generally Accepted Accounting Principles
    1258 words | 6 pages
  • Xerox Financial Fraud Case Analysis
    1627 words | 7 pages
  • Accounting Scandal (Xerox)
    919 words | 4 pages
  • Generally Accepted Accounting Principles and Substantive Tests
    1004 words | 5 pages
  • Corporate: Generally Accepted Accounting Principles and General Reserve
    1607 words | 7 pages
  • Generally Accepted Accounting Principles
    1212 words | 5 pages
  • Report on Financial Statement Fraud Scheme Case Study: the Importance of Timing
    920 words | 4 pages
  • Gaap vs Ifrs
    6664 words | 27 pages
  • Midterm: Generally Accepted Accounting Principles and Credit Card Receivables
    1940 words | 8 pages
  • Generally Accepted Accounting Principles and Dish Network
    1226 words | 5 pages