Monday, March 25, 2019

How to counter corporate fraud

One of the most common elements among the firms, which countered frauds is the involvement of senior management in the frauds including members of the Board of Directors, the CEO, the CFO, and other key executives. It is attributed mainly to the culture of that organization demonstrated by the tone at the top, which sets the corporate culture and in many cases is a root cause of the unethical conduct and fraudulent activities (Sweeney, 2003). Culture issues start in accounting adjustments leading to massive fraud by attempting to fix each quarter’s numbers to close the gap between targets and actual results.

It is an informative post regarding corporate fraud. There are some consequences for the fraud.

  • Loss of reputation

  • Negative returns

  • Increase the cost of capital

  • Lose market share

    There are some recommendations that could help to prevent the fraud in organizations.
  • The incentives could be paid for employees after completion of projects.
  • Reducing the operational risk.
  • Select the appropriate accounting and finance approach for the organization.
  • The payment of stocks to be minimized
Pavel, T., & Encontro, M. (2012). The Enron Scandal. Göteborg: Chalmers University of Technology. Retrieved 3 6, 2019, from

Kurant, P. (2014). Corporate Fraud and its Consequences: An Empirical Study. FEP. Retrieved 3 5, 2019, from

Rockness, H., & Rockness, J. (2005). Legislated ethics: From enron to sarbanes-oxley, the impact on corporate america. Journal of Business Ethics, 57(1), 31-54. doi:10.1007/s10551-004-3819-0

Sunday, March 24, 2019

Policies that prevent corporate fraud

There are several business policies and procedures to control or limit the risk of corporate fraud.
1.  Facilitation of information to the market and to improve the problem of information asymmetries.
Financial regulators have imposed disclosure requirements as a central pillar of financial market regulation in all developed financial markets (Seligman, 1983; Coffee, 1984; Mahoney, 1995; Selden, 2006). The issuers of financial tools and financial services providers have to disclose to the market and their counterparties all relevant information, in a timely manner, and make sure all market participants have equal access to this information.
2. Protection of individuals.
The legal systems may impose duties or suitability requirement on certain market participants in order to provide the required protection of individuals who participate in the financial market with insufficient expertise to understand the information and avoid being manipulated by the others, who are more expert in the market.
3. Legal systems.
The legal systems prohibit certain deceptive behavior through general fraud laws, which may appear in both civil and criminal bodies of law (Podgor, 1999; Buell, 2006, 2011; Ryder, 2011, pp. 93–139; Harrison and Ryder, 2013, pp. 61–90). The law provides several legal acts that target different kinds of financial fraud. For example, the acts that target financial fraud in the banking or insurance sector, fraud perpetrated using mail and wire communications, or fraud perpetrated through the use of a computer or the Internet.
Rockness, H., & Rockness, J. (2005). Legislated ethics: From enron to sarbanes-oxley, the impact on corporate america. Journal of Business Ethics, 57(1), 31-54. doi:10.1007/s10551-004-3819-0

Saturday, March 23, 2019

Corporate Fraud

Corporate fraud frequently is performed by taking advantage of confidential information or access to sensitive assets, and then leveraging those assets for gain. The fraud is often hidden behind legitimate business practices or exchanges in order to disguise the illicit activity. For example, the accounting for a company may be altered to present an image of high revenue and profits compared with the actual financial results. These actions might be taken to hide shortcomings such as a net loss, slow revenue, declining sales, or hefty expenses. The falsified accounting might be done to make the company more attractive to potential buyers or investors.
Other forms of corporate fraud may aim to disguise or misrepresent a service or product the company is developing or has in service, hiding its flaws or defects. Rather than invest in repairing, refurbishing, or redesigning the product, those responsible for the product attempt to deflect or disguise these issues. This might be done if the department or company does not have the finances to correct the problem or if revealing the issue might drive away customers and investors.
If a company or individual claims it is using some of its funds to put towards investments or other types of monetary reserves that are intended to gain in value, but in actuality, those funds have been expended or diverted elsewhere, which is a type of corporate fraud.
The deceptive accounting and business practices that led to the downfall of Enronis an example of corporate fraud. Due to the widespread use of loopholes and other disguising tactics, the company hid debt from failed deals, the sum reaching into the billions of dollars. In order to maintain the charade, those responsible pressured their auditors to hide their deception, which included the destruction of financial documents.

Krambia-Kapardis, M. (2016). Corporate fraud and corruption. DE: Springer Nature.

Friday, March 22, 2019

Fraud case at battery manufacturer Ener1

This is a constructive analysis of the Fraud case at battery manufacturer Ener1 and allow me to add fraudulent financial reporting is the intentional misstatement or omission of amounts or disclosures from financial reports to deceive financial statement users (Persons, 1995).  This can be accomplished by either manipulating accounting records used to prepare the financial statements, misrepresenting transactions or information from the financial statements or Intentional misapplication of accounting principles in the financial statements. One method fraudulent financial reporting can occur is through the incorrect recognition of revenue. Depending on the circumstances, an organization may want to either overstate or understate revenue.  Such circumstances may include meeting budgeted amounts, the pressure to generate positive operating results to make the organization look better, or to show less revenue to make the organization look as though it needs more assistance than actual (Persons, 1995).  Often, the manipulation of revenue is accomplished by failing to report receivables in the proper period or holding records open beyond the period end date to inflate revenues, and that’s exactly how the three executives misappropriate the firm’s revenue. 

Persons, O. S. (1995). Using financial statement data to identify factors associated with fraudulent financial reporting. Journal of applied business research11, 38-38.

Thursday, March 21, 2019

Adelphia Communications Corporation's fraudulent financial reporting

Adelphia Communications Corporation's fraudulent financial reporting takes place in the context of earnings management. The management changes the accounting policies, or the way estimates are calculated with the intention to improve the firm’s results. Fraudulent financial reporting occurs due to personal incentives, pressures from the market, lack of ethics, deliberate compliance with the projections of financial analysts or attempts to affect the price of stock (Beasley, 2000). Fraudulent reporting can be controlled with external auditing, regulations and an independent board of directors. However, an ethical corporate culture is the main prerequisite for fair financial reporting.
Beasley, M. S., Carcello, J. V., Hermanson, D. R., & Lapides, P. D. (2000). Fraudulent financial reporting: Consideration of industry traits and corporate governance mechanisms. Accounting Horizons14(4), 441-454.

Attributes of Financial Fraud

As any thing is this world fraud has some reasons to occur, points below summarize some these reasons :-
1. Greed – good old fashioned human nature intervenes when an individual, or group of individuals, sees a chance to make ‘a fast buck’. A good example being those cases where people ‘adjust’ their expense claims upwards.
2. Lack of transparency – complex financial transactions that are difficult to understand are an ideal method to hide a fraud. The Barings fraud was perpetrated by use of an accounting ‘dump account’ that no one understood.
3. Poor management information – where a company’s management information system does not produce results that are timely, accurate, sufficiently detailed and relevant; the warning signals of a fraud, such as ongoing theft from the bank account, can be obscured.
 4. Excessively generous performance bonus payments – the more generous the bonus, when coupled to a demanding target; the more temptation there is to manipulate results, such as yearend sales figures, to reach that target.
5. Non independent internal audit department – where an organization's internal audit department is not independent, e.g. where it does not report to a truly independent audit committee but to the Finance Director, the more likely that when there are signals that a fraud is occurring the more likely they will be ignored. It is indeed interesting to note that Cynthia Cooper (Head of Internal Audit at WorldCom) had to bypass her boss (the CFO) and go directly to the audit committee to report the discovery of the capital expenditure fraud.
 6. Lack of clear moral direction from senior management – leadership comes from the top. Where the senior management indulge themselves in ‘semi corrupt’ behavior, e.g. adjusting their expense claims upwards, others will follow adopting the well worn mantra ‘everyone’s at it’.
7. Excessively complex organizational structure – designed to obfuscate the revenue streams; and so hide reality from third parties, such as the Internal Revenue Service. Enron, with its complex off balance sheet structure and transactions, is a textbook example of this.
 8. Poor accounting controls– where the accounting controls, such as a monthly reconciliation of the bank account, are lapse the signals that a fraud has occurred will be missed.
9. Arrogance – some people believe that they are better than ‘the system’, and that they can get away with anything. The late Robert Maxwell plundered his company pension scheme, arrogantly assuming that since he was chairman of the company he could get away with it; he almost did!
10. Complacency – I have met many a manager who has an almost childlike faith, based in part on the ‘old boy’ network, in the probity of their colleagues; believing that fraud ‘is not the sort of thing that could happen here’. Others will, and do, take advantage of that trust.

Comer, M. J. (1985). Corporate fraud. McGraw-Hill Book Co.

Wednesday, March 20, 2019

E-commerce technologies comparison between Amazon and Jarir Bookstore

E-commerce is one of the most famous terms of the era of information technology and knowledge, and it has a lot of tariffs and its idea revolves around selling or buying anything at any time for the purpose of trading and competition in a local or global market or both (“Ecommerce-platforms”,2019). 
 As a purely commercial activity through a simple website and bank accounts, but with no spatial or temporal limitations, and this is a general idea of its recent activity, thousands of websites that are considered as a market for commercial exchanges and the sale and purchase of digital products and services have created a revolution in the culture of buying. The sale is no longer a constraint that makes you have to travel somewhere to make a business deal or contract a trade agreement to sell or buy a product (“Ecommerce-platforms”,2019). 
There is no longer a problem in the timing and can be purchased in the morning or the evening sale, all those concepts faded in the presence of an open market 24 hours a day, 30 days a month, three hundred and sixty-five days a year, and in constant renewal and increasing spread. It has become possible to create a global market, not only local, where all can compete to attract the largest number of buyers and increase profits, for proportions that may reach figures that normal trade could never achieve (“Ecommerce-platforms”,2019)

Ecommerce-platforms. (n.d.). E-commerce Definition. What is Ecommerce? E commerce Explained for 2019. Retrieved 2019, from

Tuesday, March 19, 2019

Terrible Financial Fraud and Corruption

No doubt, an employer can neither make the employees satisfied nor motivate them to deliver their best performance to the company without giving them the feeling of being trusted by the company (Brown, Gray, McHardy, & Taylor, 2015). However, there must be some limits to trust. The policies must be efficient enough to prevent employees from embezzling the funds and timely alerting the management. Proper code of conduct and strong organizational culture could help the management in timely detecting and preventing the fraud at Enron.

As per my research and observation, most of the frauds are committed by artificially tailoring the account records. Financial embezzlements have encouraged the frequent introduction of different fraud schemes. I agree with you that an ERP accounting software could help the company is avoiding such a massive fraud. It can raise the fraud prevention intelligence of the management. It can enable effective audit and prevent the unauthorized access to the accounting system (Fernandez, Zainol, & Ahmad, 2017).


Brown, S., Gray, D., McHardy, J., & Taylor, K. (2015). Employee trust and workplace performance. Journal of Economic Behavior & Organization, 116, 361-378.

Fernandez, D., Zainol, Z., & Ahmad, H. (2017). The impacts of ERP systems on public sector organizations. Procedia computer science, 111, 31-36.

Monday, March 18, 2019

Fraud and Corruption

Fraud, corruption, and corporate crime serve as examples of white-collar crime. Alone or in combination, they can contribute to the collapse of corporations or even be instrumental in a national or global financial crisis as happened in 2007–2008. Fraud and corruption raise ethical issues and indicate dishonest behavior. Legislation addressing fraud should also include corruption as a criminal offense. The recent crisis in the Eurozone has focused attention on corruption. In the case of Greece, for example, corruption is endemic and has stifled development of the country’s economy and the modernization of its public service for decades. Corruption of this nature on such a large scale is a malignant cancer that sinks a country ever deeper into national debt. 

Krambia-Kapardis, M. (2016). Corporate fraud and corruption. DE: Springer Nature.

Sunday, March 17, 2019

Thoughts on Financial Fraud

Fraud can have a substantial impact on a business, no matter what size it is. The two most basic types of fraud are misappropriation of assets by employees and fraudulent financial reporting by management, whereby misleading or inaccurate financial information is disseminated to investors, stakeholders and the public. The first type of fraud often happens without management knowledge, and the second type is often unknown to employees. Both can devastate a company.
Financial loss is an obvious effect of both types of fraud. When someone misappropriates company assets, the loss is fairly easy to quantify. For example, if a cashier takes $60 from the cash register, the company loses $60. The costs of fraudulent financial reporting are harder to determine. If a small-business owner perpetrates financial statement fraud, an explicit dollar figure might not be obvious. However, fines assessed for misleading investors, civil suits to recoup investor and creditor losses and the unwillingness of companies to extend credit to the business in the future all add up to a severe financial loss for the company.
Reference :
Fich, E. M., & Shivdasani, A. (2007). Financial fraud, director reputation, and shareholder wealth. Journal of Financial Economics, 86(2), 306-336. 

Friday, March 15, 2019

Digital Marketing Advice

My advice would be predicated on the individual, the nature of the business, the nature of my relationship to this business, perhaps they are my competitor and I would provide them bad advice. Presuming I were a nice guy, they do not pose a competitive threat, they are receptive and reasonably intelligent but not overly knowledgeable in the realm of digital marketing and were starting a business in the consumer services sector I might suggest the following.
·   Get a website and optimize for mobile.

·     Find out what your competitors are doing on social media and engage on those platforms and any others your target demo engages with. (time and resource permitting). Set up analytics and ad words account with Google and start experimenting with generating traffic to the website in an iterative loop of having a goal, researching, implementation, analysis, and refining. I might also suggest they check out Hubspot or other web-based marketing resources.

The advice I would give a business that is just starting out with digital marketing is to make sure their website is clean and easy to navigate. Not have too many menu categories, not have too many photos and make sure their photos aren’t randomly placed all over the page. I would also advise them to only put photos that are relevant to their products/services on their website.
My next advice would be to focus on one social platform, learn everything you can about it and how to leverage it for business. It’s better to have one platform and be proficient in it; versus having multiple platforms that are rarely and/or improperly used. Once the business is proficient in one platform then it can expand to another platform and once, they’re proficient in that one, add another one. However, it is not necessary to have multiple platforms to gain more followers/customers. It’s best to be an expert in one platform.

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