Posted by YEO Wei Lin, Year 3 undergrad at the School of Accountancy, Singapore Management University
THE directors of Yahoo! were “so spooked by being cast as the worst board in the country” that they fired Carol Bartz as chief executive “to show that they’re not the doofuses that they are.” That was Ms Bartz’s typically blunt verdict, offered to Fortuneafter she was dismissed with a phone call by the internet firm’s chairman, Roy Bostock, on September 6th. Continue reading →
Let me make it clear at the outset that I had never done short selling nor do I plan to do in future. But I found principles of short selling technique to be equally helpful to long-term investors. For short sellers the maximum upside is 100% whereas downside is UNLIMITED. These asymmetrical returns force short sellers to be much more diligent and conservative compared to long only investors. I was surprised to note that most successful short sellers NEVER SHORT ANY STOCK MERELY ON OVER-VALUATION. I am not talking here about short sellers who short a stock in the morning and cover their position by the end of the day. I am talking about short sellers, who after deep analysis create a position and hold on to it until their conviction pays off.
Charlie Munger once said, ‘All I ever want to know is where I’m going to die, so I never go there’. My sole attempt at studying short selling technique is to find what successful short sellers look for in a good short and to avoid such stocks.
Posted by Latha Do NADARAJAN, Year 3 undergrad at the School of Accountancy, Singapore Management University
Imagine an external auditor in this situation. In the course of a financial statement audit, unequivocal evidence of a fraud is uncovered. The auditor confronts the client with evidence; the client admits to the fraud and agrees to make the requisite adjustments in the firm’s financial statements. The auditor also notifies the client’s audit committee of the fraud. However, the committee comes to the decision that no further action is necessary. Continue reading →
Posted by John SOH Yong Ye, Year 4 undergrad at the School of Economics, Singapore Management University
Alibaba Group Holding Ltd. investors got a taste this week of why investing in Chinese businesses can be fraught no matter how large or blue chip the company is. Although the e-commerce giant, in my view, appears to be on solid legal ground with the disclosures it made to investors ahead of its IPO in September about its challenges with fake goods, the skirmish shows there are limits on how much investors can really know about Alibaba or any public company relying heavily on Chinese operations. Continue reading →
Journal of Business Ethics. Oct2013, Vol. 117 Issue 2, p413-429. 17p. 8 Charts.
This study explores the aspects of the relationship between possible indicators of CEO narcissism and fraud. Highly narcissistic CEOs undertake challenging or bold actions to obtain frequent praise and admiration. The pursuit of narcissistic supply may result in a stronger likelihood of a CEO to undertake bold actions with potential detrimental consequences for the organization. The sample consists of all S&P 500 CEOs from 1992 till 2008 with more than 3 years of tenure. The measurement of CEO narcissism is based on 15 objective indicators and fits the main conceptualization of narcissism. This data collection provides a score for all S&P 500 CEOs according to their narcissistic tendencies. The Accounting and Auditing Enforcement Releases on the SEC’s website are the indicators of managerial fraud. The findings confirm the expected influence of plausible proxies for CEO narcissism on fraud by showing a positive relationship. This confirms the psychologic perspective of CEO narcissism as a potential cause of fraud.
Posted by M Laavanya, Year 3 undergrad at the School of Accountancy, Singapore Management University
FRAUD IN THE BOARD
Sacked by Olympus for his stand against financial corruption, ex-CEO Michael Woodford describes what happened when he blew the whistle
This article was first published in the January 2013 International edition ofAccounting and Businessmagazine.
With three decades working for a Japanese camera giant under your belt, you are rewarded for leading the growth of the European arm with promotion to company president – the first non-Japanese national ever to hold the post. The fact your new role starts on April Fool’s Day does not seem an omen. Continue reading →
A sign of a good scam is that it’s hard to tell who’s being scammed. So here is a charming little story about International Capital Group, which agreed to pay $4.3 million to the Securities and Exchange Commission to settle charges of penny-stock misbehavior. ICG basically ran a pawn shop for penny stocks. Lots of founders/promoters/chief executive officers of tiny public companies own lots of stock in their companies, and not much else. And some of them would like to turn that stock into money.
But controlling insiders can’t sell their stock without registering the sales with the SEC. This requires things like, you know, audited financial statements, which can be a problem if you’re a tiny company with dubious financials. Even more important, registration also means disclosure. And when the founder and chief executive officer and majority shareholder of a tiny company publicly announces that he’s dumping all his stock, that … tends to push the stock price down. The trick is to get money for your stock without telling anyone that you’re selling
JANUARY 29, 2015 3:07 PM January 29, 2015 3:07 pm 2 Comments
Carson C. Block is the director of research forMuddy Waters, a research and investment firm. He is on Twitter at @muddywatersre
I’m often left scratching my head when seemingly smart investors get blindsided by a fraud. But I’ve learned that it isn’t reasonable to expect them to entirely avoid mistakenly getting taken in by what on the surface seems like a sound investment but turns out to be a fraud. A buying mentality is simply incompatible with the skeptical mentality needed to avoid scams. Continue reading →
Based on data collected from 616 experienced financial officers who use U.S. GAAP or IFRS and are domiciled in the U.S., Europe, or Asia, we examine how reporting standards (U.S. GAAP vs. IFRS) and domicile (U.S. vs. non-U.S.) affect earnings management (real vs. accrual). U.S. firms using U.S. GAAP rely more heavily on real methods than non-U.S. firms that use either IFRS or U.S. GAAP, and U.S. firms using IFRS. U.S. firms using U.S. GAAP operate in an environment that encourages real over accruals methods; specifically, U.S. GAAP facilitates detection of earnings management and enforcement is more effective in the U.S. Further, the likelihood and amount of earnings management does not differ across conditions, suggesting that firms using less accruals earnings management tend to fully compensate by increasing real methods. So, stronger reporting environments do not necessarily reduce total earnings management, but instead encourage substitution of real for accruals methods.
Posted by TEH Jun Wen, Year 3 undergrad at the School of Accountancy, Singapore Management University
(Financial shenanigans cost shareholders billions of dollars. This is part of an ongoing series about how to spot Wall Street wrongdoing before it puts your portfolio in jeopardy. See last week’s “Is There an Enron Sitting In Your Portfolio?” for more.)
For many companies, meeting or beating quarterly earnings estimates matters more than anything else. Add stock options to the mix, or big cash bonuses tied to short-term earnings or stock price targets, and executives’ temptation to focus exclusively on quarterly results becomes irresistible. In the worst cases, this tunnel vision can drive companies to creative accounting, or even fraud. Continue reading →