Author: bambooinnovator

‘Audit firms need to be put under lens’

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http://indianexpress.com/article/business/business-others/audit-firms-need-to-be-put-under-lens/

‘Audit firms need to be put under lens’

Sandeep Singh

10 April 2015

Indian Express

As a special court sentenced B Ramalinga Raju, chairman of erstwhile Satyam Computers, to 7 years in jail along with a Rs 5 crore penalty and holding two former partners of its auditing firm Price Waterhouse accountable in the fraud case, regulatory officials, who were involved with the case, said that accounting firms should also be held accountable.

“Nothing has happened to the audit firm because, in India, while institutions have disciplinary powers over individuals, they can do nothing to the firm and this needs to be looked into. In developed nations accounting firms have been held accountable,” said a former Sebi official. He added: how can the firm justify the fact that the auditor did not raise issues even as accounts were manipulated for 28 quarters? Continue reading →

Predicting Large Negative Stock Returns: The Trouble Score

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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2589272

Predicting Large Negative Stock Returns: The Trouble Score

  1. Korcan AkUniversity of California, Berkeley – Haas School of Business
    April 6, 2015

Abstract: 
The purpose of this study is to predict large negative stock returns. I create an indicator variable, which takes the value of one when a company experiences a stock price decline of 50 percent or more over the subsequent year. Then, using both accounting-based and market-based variables, I predict this large change by using a logit model; the outcome of this prediction is the “Trouble Score”. The top three deciles of the T-Score correctly classify 63.00 percent of observations for the in-sample tests and 60.52 percent of observations for the out-of-sample period. Further, I document a significant and negative association between the out-of-sample T-Score and future stock returns even after controlling for well-known risk factors and control variables that are correlated with future stock returns.

Spotting lies, and the lying liars who layer them; Muddy Waters engaged behavioral analysis firm Qverity to analyze management’s statements on the February 26th Q4 2014 results call for deception; Noble Group: Muddy Waters Concerns Over Fair Value Gains “Valid,” Says UBS

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http://ftalphaville.ft.com/2015/04/09/2126069/spotting-lies-and-the-lying-liars-who-layer-them/

http://blogs.barrons.com/asiastocks/2015/04/10/noble-group-muddy-waters-concerns-over-fair-value-gains-valid-says-ubs/?mod=BOL_hp_blog_astw

Spotting lies, and the lying liars who layer them

Dan McCrum

| Apr 09 13:11 | 10 comments | Share

Can you spot a lie? What about a half-truth, a sin of omission or the telling smirk of someone who thinks they got away with it? How about the grand lie, so big it has pillars and caverns of mis-truth, or the subtle wave of misdirection? Short sellers like to look for lies, in company accounts or in what management say. Find one, stick a red flag in it and go looking for more, on the basis if there’s one there’s several: lies multiply. There is also a small cottage industry in the art of deception, from books of facial expressions to help you play poker all the way to ex-CIA consultants offering interrogation advice.

For instance, the latest report from Muddy Waters on the commodity trading group Noble, which includes some “third party behavioural analysis” of management statements. Muddy Waters engaged Qverity to analyze management’s statements on the February 26th Q4 2014 results call for deception. (The call is the only time Noble management has spoken extemporaneously in public about the recent criticism.) Qverity provides behavioral analysis, and is founded and staffed by former United States Central Intelligence Agency experts in detecting deception. Its principals authored the books “Spy the Lie” and “Get the Truth”. Continue reading →

Winsway (1733 HK) Missed Bond Payment Heightens Chinese Default Risk

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http://www.bloomberg.com/news/articles/2015-04-09/winsway-misses-dollar-bond-payment-as-asia-coal-distress-deepens

Winsway Missed Bond Payment Heightens Chinese Default Risk

byDavid Yong

April 9, 2015

Investors in coal-related companies face heightened default risks after one that relies on markets in China and Mongolia became the latest Chinese corporate to miss an interest obligation.

Winsway Enterprises Holdings Ltd., an importer of coal for steelmakers, didn’t make a $13.15 million semi-annual coupon payment due Wednesday on $309.3 million of notes maturing in April 2016, according to a stock exchange filing. It plans to use a 30-day grace period to discuss restructuring the debt after hiring Akin Gump Strauss Hauer & Feld LLP as a legal adviser to an expected group of bondholders. Continue reading →

Ex-Keangnam chief found dead in suicide; He allegedly embezzled 25 billion won from the fund and was engaged in fraudulent accounting to the tune of 950 billion won

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http://www.koreatimes.co.kr/www/news/nation/2015/04/116_176833.html

Updated : 2015-04-09 18:46

Ex-Keangnam chief found dead

Probe into energy projects expected to hit wall
By Lee Kyung-min

Former Keangnam Enterprises Chairman Sung Woan-jong was found dead on Mt. Bukhan in an apparent suicide, Thursday. He has been at the center of an investigation into the failed “energy diplomacy” of the previous Lee Myung-bak administration. Continue reading →

Raju found guilty in Satyam scam but size of sentence, seven years, is what really matters; Harvard’s corporate governance professor Krishna Palepu, an independent director at Satyam, has been asked to disgorge nearly half a million dollars in excess remuneration paid by the company

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http://www.firstpost.com/business/satyam-scam-raju-found-guilty-but-size-of-sentence-is-what-really-matters-2190513.html

http://www.ft.com/intl/cms/s/0/9a3106b2-dea7-11e4-8a01-00144feab7de.html#axzz3Wow2CeD7

http://www.wsj.com/articles/satyams-raju-held-guilty-of-cheating-1428564725

Raju found guilty in Satyam scam but size of sentence is what really matters

by R Jagannathan  Apr 9, 2015 13:01 IST

How many days does it take a legal system to convict a self-confessed white collar criminal?

The answer: Six years and 92 days.

Satyam Comuputer’s iconic former owner, B Ramalinga Raju was today (9 April) convicted for financial fraud that he had voluntarily confessed to on 7 January 2009. During this time he has spent some time in prison, along with his brother and other co-conspirators, but he has been more out of jail than in it as he pleaded ill-health. Continue reading →

Revised Auditing Standard Puts Onus on Auditor to Read Annual Reports

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http://www.accountingtoday.com/news/audit-accounting/revised-auditing-standard-puts-onus-on-auditor-to-read-annual-reports-74233-1.html

Revised Auditing Standard Puts Onus on Auditor to Read Annual Reports

NEW YORK (APRIL 8, 2015)

BY MICHAEL COHN

The International Auditing and Assurance Standards Board has released a revised International Standard on Auditing that encourages auditors to thoroughly read through a company’s annual report when auditing, as it provides critical information to the auditor and is ultimately beneficial to the public interest.

Continue reading →

Do Accounting Errors Breed Fraud?

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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2590155

Do Accounting Errors Breed Fraud?

Vivian W. Fang University of Minnesota – Twin Cities – Department of Accounting

Allen Huang Hong Kong University of Science and Technology – Department of Accounting

Wenyu Wang Indiana University – Kelley School of Business – Department of Finance
April 5, 2015
Kelley School of Business Research Paper No. 15-29

Abstract: 
This paper links accounting errors to firms’ incentives for fraud. While errors discourage fraud by lowering the value relevance of reported earnings, they also incentivize fraud by providing camouflage. We analyze the two effects in the framework of Fischer and Verrecchia (2000) and generate hypotheses. Using intentional and unintentional misstatements as empirical proxies for fraud and errors, respectively, we document a hump-shaped relationship between an industry’s prevalence of fraud and that of errors. This result is robust to using SEC enforcement actions or the likelihood of meeting or marginally beating analyst consensus forecasts as alternative proxies for fraud. Motivated by three causes of errors (i.e., transaction complexity, regulation ambiguity, and staffing deficiency), we use firms’ number of items in their quarterly filings, rules-based characteristics of accounting standards, and state boards’ CPA requirements as alternative proxies for errors. These proxies are associated with fraud in a similar fashion as errors. Our results highlight an important economic implication of accounting errors and shed light on the recent debate on “principles-based” versus “rules-based” accounting systems.

Ozner (2014 HK): Glaucus Research’s Rebuttals

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(2014) Ozner Water International :
Glaucus Research announced another report commenting on Ozner Water’s announcement as “not entirely accurate,” “inconsistent,” and “not inclusive of all changing scenarios”. The short-seller kept their suggestion of Strong Sell. In relation to the allegation of material exaggeration of sales, production and profit, Ozner Water explained days ago that the purported discrepancy is primarily attributable to the timing difference in revenue recognition for accounting and tax reporting purposes.