Day: January 20, 2015

“Indian promoters have a mindset that they are not accountable to anyone.” – Accounting Fraud in India: The Indian Context

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http://tejas.iimb.ac.in/interviews/11.php

ACCOUNTING FRAUD : THE INDIAN CONTEXT

with R. Narayanaswamy, Professor

The past few years have seen several headline-grabbing incidents of corporate fraud in India. There were the Harshad Mehta and Ketan Parekh cases, followed by the Unit trust of India case. And now, we have seen the Satyam and World Bank-Wipro cases that have not just tested the Indian business framework, but also sent ripples across the global scene. It is imperative that we take notice of this growing systemic problem and understand its motivations and methods. In this interview with Prof. R. Narayanaswamy, faculty in the Finance and Control area at IIM Bangalore and a veteran in accounting, we take a closer look on the cases at hand, concentrating on accounting fraud in India but examining it from different perspectives. Continue reading →

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‘India is not unique in having accounting frauds, but the problem is more severe here’

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http://businesstoday.intoday.in/story/india-is-not-unique-in-having-accounting-frauds-but-the-problem-is-more-severe-here/1/201367.html

‘India is not unique in having accounting frauds, but the problem is more severe here’

Sarika Malhotra         Last Updated: December 10, 2013  | 22:19 IST

Non-executive directors at Indian firms have not proved effective

Reshmi Khurana, MD, Kroll India

Private equity funds have become more vigilant in tracking precisely why some of their portfolio companies are not doing well. At least two cases of alleged fraud by the companies invested in doctoring of books or fudging the minutes of meetings are well known.
In 2011, PE firms Bain Capital and TPG Capital dragged Lilliput Kidswear to court over alleged accounting fraud. This year, private equity firm SAIF Partners alleged that home-grown kids’ wear retailer Catmoss was cooking its books.  Continue reading →

Does pedigree matter? Earnings quality of US listed domestic firms via reverse mergers

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http://ac.els-cdn.com/S0278425414000684/1-s2.0-S0278425414000684-main.pdf?_tid=1428bd6c-a0c7-11e4-bcce-00000aab0f6b&acdnat=1421773942_e4d24b7227d92a003914d82a20cf45f9

Investigators at Louisiana State University Report Findings in Finance (Does pedigree matter? Earnings quality of US listed domestic firms via reverse mergers)

24 January 2015

Investment Weekly News

2015 JAN 24 (VerticalNews) — By a News Reporter-Staff News Editor at Investment Weekly News — Researchers detail new data in Finance. According to news originating from Baton Rouge, Louisiana, by VerticalNews correspondents, research stated, “This paper examines earnings quality of U.S. domestic firms that access capital markets via a reverse merger transaction (RM firms) compared to those via the more traditional initial public offering (IPO firms) during the period from 1997 to 2011. In order to mitigate confounding effects of legal regime, law enforcement, and culture, we require both the acquiring and target firms to be incorporated and headquartered in the U.S. to be included in our sample.”

Our news journalists obtained a quote from the research from Louisiana State University, “We also use the Heckman (1976) procedure to control for self-selection bias. To capture earnings quality, we use a battery of measures established in prior literature, including discretionary accruals, discretionary revenues, real activities earnings management, and accrual estimation errors. Our measures have both convergent and discriminant validity and therefore appear to capture earnings quality fairly well. We find consistent evidence that U.S. domestic RM firms have lower earnings quality compared with U.S. IPO firms.”

According to the news editors, the research concluded: “Our evidence suggests that investors and other stakeholders should take into account the fact and consequences of the method that firms use to access capital markets in their investment decision making process.”

Journal of Accounting and Public Policy

Volume 33, Issue 6, November–December 2014, Pages 573–595

Does pedigree matter? Earnings quality of U.S. listed domestic firms via reverse mergers

Yu Chena, , , Jared S. Soileaub, 1, 

Abstract

This paper examines earnings quality of U.S. domestic firms that access capital markets via a reverse merger transaction (RM firms) compared to those via the more traditional initial public offering (IPO firms) during the period from 1997 to 2011. In order to mitigate confounding effects of legal regime, law enforcement, and culture, we require both the acquiring and target firms to be incorporated and headquartered in the U.S. to be included in our sample. We also use the Heckman (1976) procedure to control for self-selection bias. To capture earnings quality, we use a battery of measures established in prior literature, including discretionary accruals, discretionary revenues, real activities earnings management, and accrual estimation errors. Our measures have both convergent and discriminant validity and therefore appear to capture earnings quality fairly well. We find consistent evidence that U.S. domestic RM firms have lower earnings quality compared with U.S. IPO firms. Our evidence suggests that investors and other stakeholders should take into account the fact and consequences of the method that firms use to access capital markets in their investment decision making process. 

ACCT004 Course Video – Mickey to Rocky: “And I will watch you make good. And I’ll never leave you until that happens. Because when I leave you, you’ll not only know how to fight. You’ll be able to take care of yourself outside the ring, too, is that okay?”

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Dear ACCT004 class,

As shared in class with the Rocky video, I have been touched by an angel (Professor KS Leong) when I was studying in university many years ago; now, I am grateful to be able to share real-world practical insights with you.. hopefully to get you intellectually curious, to reawaken your thirst for learning, and to help you understand accounting fraud in Asia in a framework to spark critical thinking.. “And I will watch you make good in this world.. You will not only know how to fight. You’ll be able to take care of yourself outside the ring too.”

Warm regards,

KB

Mickey: Slip the jab, will ya? Slip the jab! That’s right, that’s it. Hey, I didn’t hear no bell!

Rocky: Okay.

Mickey: All right. That’s right. Slip the jab. That’s it! Mentalize! See that bum in front of you! You see yourself doing right and you do right! That’s pretty. That’s very pretty. Time! Ah, come here Rock. My God, you’re ready, ain’t you? Apollo won’t know what hit him. You’ll roll over him like a bulldozer, an Italian bulldozer. You know, kid, I know how you feel about this fight that’s coming up because I was young once, too. I tell you something. If you weren’t here, gee, I probably wouldn’t be alive today. The fact that you’re doing here and doing as well as you’re doing gives me… What do you call it? A motivization to stay alive? Because I think that people die sometimes when they don’t wanna live no more. And nature’s smarter than people think. Little by little, we lose our friends, we lose everything. We keep losing and losing till we say, “What the hell am I living for? I got no reason to go on.” But with you, kid, boy, I got a reason to go on. And I’m gonna stay alive. And I will watch you make good. And I’ll never leave you until that happens. Because when I leave you, you’ll not only know how to fight. You’ll be able to take care of yourself outside the ring, too, is that okay?

Rocky: It’s okay.

Mickey: Okay. Now I got a little gift for you.

Rocky: Aw Mick..

Mickey: Wait a minute now.

Rocky: I don’t need nothing.

Mickey: Look at this. See that? This here’s the favorite thing that I have on this earth. And Rocky Marciano give me that. You know what it was? His cuff link. And now I’m giving it to you. And it’s gotta be like an angel over your shoulder, see? If you ever get hurt, and you feel that you’re going down, this little angel is gonna whisper in your ears. He’s gonna say, “Get up, you son of a bitch! ‘Cause Mickey loves ya!”

ACCT004 Course Video – It’s the Dawn: I don’t know what are the risks and dangers I will encounter in my future; I need to learn to be strong by myself in this world; I am willing to build for my loved ones a beautiful Garden.

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Dear ACCT004 class,

From the YouTube videos of the singers’ performance (English translation of the meaningful lyrics below), we can all feel their Dedication and Attitude towards Singing.. they found their own Voice that touches the heart of the people around them and I hope all of us will too, in our own Way.. As you develop and acquire your own Voice and the Mastery of your skills, I will be anxious, available and cheering for you!

Warm regards,
KB

Continue reading →

[Flashback] New Japanese Internal Controls Framework: Japan Works To Deter Fraud With “J-SOX”

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http://www.fraud-magazine.com/article.aspx?id=415

Posted by Amy CHAN Wen Yi, Year 4 undergrad at the School of Accountancy, Singapore Management University

Takafumi Horie had no use for conventional Japanese business practices. This 30-something, self-proclaimed Web entrepreneur geek donned black T-shirts and jeans while most businessmen still wore the standard-issue gray suits.1 He flaunted the millions he amassed from his Livedoor Co. Ltd., an Internet service provider, and the companies he bought. He drove a Ferrari, lived in one of Tokyo’s flashiest apartment complexes, and bragged about his success on television – a Japanese taboo where modesty is prized. Continue reading →

[Flashback] More banks targeted for mortgage securities fraud: NY attorney general

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http://www.reuters.com/article/2015/01/15/us-nyag-interview-schneiderman-idUSKBN0KO2JE20150115

Posted by Latha Do NADARAJAN, Year 3 undergrad at the School of Accountancy, Singapore Management University

New York’s top law enforcement official said he plans to help bring more fraud cases against the world’s biggest banks for selling shoddy mortgage-backed securities before the 2008 financial crisis. Continue reading →

Credit Suisse Sues REI Agro in Singapore Over Alleged Loan Fraud for non-existent trades of the staple using a web of sham rice-trading companies in Singapore and Hong Kong

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http://www.bloomberg.com/news/print/2015-01-20/credit-suisse-sues-rei-agro-in-singapore-over-alleged-loan-fraud.html

Credit Suisse Sues REI Agro in Singapore Over Alleged Loan Fraud

By Andrea Tan – Jan 19, 2015

Credit Suisse Group AG (CSGN) sued REI Agro Ltd. (REIA) in Singapore claiming the Indian basmati rice producer and 16 related companies conspired to get loans for non-existent trades of the staple. REI Agro founders Sandip and Sanjay Jhunjhunwala used a web of sham rice-trading companies in Singapore and Hong Kong to support a 2012 $115.5 million loan agreement by REI Agro’s Dubai-based Ammalay Commoditiess JLT, according to a lawsuit in the Singapore High Court. Continue reading →

Weavering Hedge Fund Founder Magnus Peterson Found Guilty of Fraud, Forgery, False Accounting and Fradulent Trading; The fund’s entire net worth was found to consist of interest-rate swaps where the counterparty was a company based in the British Virgin Islands controlled by Peterson himself

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http://www.wsj.com/articles/weavering-hedge-fund-founder-found-guilty-of-fraud-1421697445

Weavering Hedge Fund Founder Found Guilty of Fraud: Jury Finds Swedish Financier Guilty on 8 Counts

LAURENCE FLETCHER

Jan. 19, 2015 2:57 p.m. ET

The conviction of hedge fund manager Magnus Peterson on Monday marks a winning end to a long-running probe by the U.K.’s Serious Fraud Office. In the U.K.’s first prominent hedge fund manager conviction since the credit crisis, a jury found the Swedish financier who ran Weavering Macro Fund guilty on eight counts of fraud, forgery, false accounting and fraudulent trading. Continue reading →

Does Religion Mitigate Accounting Tunneling of Corporate Wealth? Evidence from Chinese Buddhism

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http://eds.a.ebscohost.com.libproxy.smu.edu.sg/ehost/pdfviewer/pdfviewer?sid=1b6f6267-58d0-4f12-869e-add96ec6cd0f%40sessionmgr4005&vid=0&hid=4210

Does Religion Mitigate Tunneling? Evidence from Chinese Buddhism

Du, Xingqiang1 xqdu@xmu.edu.cn

Journal of Business Ethics. Dec2014, Vol. 125 Issue 2, p299-327. 29p. 14 Charts, 1 Map.

Abstract:

In the Chinese stock market, controlling shareholders often use inter-corporate loans to expropriate a great amount of cash from listed firms, through a process called ‘tunneling.’ Using a sample of 10,170 firm-year observations from the Chinese stock market for the period of 2001-2010, I examine whether and how Buddhism, China’s most influential religion, can mitigate tunneling. In particular, using firm-level Buddhism data, measured as the number of Buddhist monasteries within a certain radius around Chinese listed firms’ registered addresses, this study provides strong evidence that Buddhism intensity is significantly negatively associated with tunneling. This finding is consistent with the view that Buddhism has important influence on corporate behavior and can serve as a set of social norms and/or an alternative mechanism to mitigate controlling shareholders’ unethical tunneling behavior. In addition, my findings also reveal that the negative association between Buddhism intensity and tunneling is attenuated for firms that have high analyst coverage. The results are robust to various measures of Buddhism intensity and a variety of sensitivity tests.