DOCSLIB.ORG

Responses by the Federal Communications Commission to Worldcom's Accounting Fraud

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text

Load more

Federal Communications Law Journal Volume 58 Issue 3 Article 21 6-2006 Responses by the Federal Communications Commission to WorldCom's Accounting Fraud Warren G. Lavey Skadden, Arps, Slate, Meagher & Flom Follow this and additional works at: https://www.repository.law.indiana.edu/fclj Part of the Administrative Law Commons, Antitrust and Trade Regulation Commons, Communications Law Commons, Legislation Commons, and the Securities Law Commons Recommended Citation Lavey, Warren G. (2006) "Responses by the Federal Communications Commission to WorldCom's Accounting Fraud," Federal Communications Law Journal: Vol. 58 : Iss. 3 , Article 21. Available at: https://www.repository.law.indiana.edu/fclj/vol58/iss3/21 This Article is brought to you for free and open access by the Law School Journals at Digital Repository @ Maurer Law. It has been accepted for inclusion in Federal Communications Law Journal by an authorized editor of Digital Repository @ Maurer Law. For more information, please contact [email protected]. Responses by the Federal Communications Commission to WorldCom's Accounting Fraud Warren G. Lavey* I. INTRODUCTION ............................................................................. 615 II. How DID THE FCC RESPOND IN THE DAYS AND WEEKS FOLLOWING WORLDCOM'S DISCLOSURE? .................. .. .. .. .. 619 A. WorldCom's Disclosure of Accounting Fraud..................... 619 B. FCC's Public Statements Responding to WorldCom's D isclosures............................................................................ 624 C. Analysis of the FCC'sImmediate Response ......................... 628 III. WHAT REGULATIONS DID THE FCC APPLY OR NOT APPLY TO WORLDCOM DURING THE ACCOUNTING FRAUD9 ....................... 631 A. Findings of Financial and Character Qualifications for WorldCom 's Licenses ........................................................... 631 1. Legal Framework for the FCC's Analysis of W orldCom's Qualifications ............................................ 631 2. Annlcation of Financial and Character Oualifications Tests to WorldCom During the Fraud ......................... 634 B. Assessment of WorldCom as a Financially Strong Competitor in Authorizing Other Carriers........................... 635 C. Audit of and Reports by WorldCom ...................................... 637 *Partner, Skadden, Arps, Slate, Meagher & Flom LLP. J.D., Harvard Law School; former Adjunct Professor, Washington University Law School and Kellogg School of Management, Northwestern University; former Assistant to the Chief, Common Carrier Bureau, Federal Communications Commission. I am grateful for the assistance of Anthony Oettinger, David Prohofsky, Joseph Hanley, James Harper, Blair Levin, Holly Rosencranz, Ruth Milkman, and Joan Summers. Errors are mine alone. FEDERAL COMMUNICATIONS LA W JOURNAL [VOL. 58 D. StatisticalReports Reflecting WorldCom's Financials......... 640 E. Enforcement Action ............................................................... 64 1 F. Regulations of Prices, Terms, and Conditions for Services Offered by Local Exchange Carriers.................................... 645 G. Analysis of the FCC's Relevant Regulations During the WorldCom Accounting Fraud............................................... 646 IV. AFTER SEVERAL YEARS, How DID THE FCC CHANGE OR NOT CHANGE ITS REGULATIONS RELATED TO WORLDCOM'S D ISCLOSURE? ........................................ .. .. .. .. .. .. .. .. 64 9 A. FCC Proceedings Triggeredby WorldCom's Disclosure .... 649 1. Discontinuance of Some Noncore Services .................... 650 2. WorldCom 's Licenses ..................................................... 651 3. Local Exchange Carriers' Protection Against U ncollectibles .................................................................. 654 B. Continuation of Other FCC Regulations Related to W orldCom 's D isclosure........................................................ 655 1. Information Filing and Accounting Requirements for Nondominant Carriers ..................................................... 656 2. License Applications ....................................................... 657 3. A udits .............................................................................. 659 4. Enforcement Actions ....................................................... 660 C. Analysis of the FCC's Maintenance of its Regulations and PracticesFollowing its Public Statements on WorldCom's Disclosure ............................................................................. 662 V. WHAT EXPLAINS THE FCC's RESPONSE TO WORLDCOM'S D ISCLOSURE? ...............................................................................663 A. ProtectingConsumers and Rooting Out CorporateFraud.. 663 B. Partial Explanations for the FCC's Stance on Financial F raud ....................................................................................668 1. Changes in Securities Laws, SEC Regulations, and Other SEC and Justice Department Actions ................... 668 2. Telecommunications Industry Downturn ........................ 672 3. Deregulation and Market Forces ..................................... 674 4. Political Accountability ................................................... 677 V I. C ONCLUSION ................................................................................ 679 NUMBER 31 WORLDCOM'S ACCOUNTING FRAUD I. INTRODUCTION The disclosure of massive financial accounting fraud at WorldCom, Incorporated ("WorldCom") on June 25, 2002,1 was a major shock to the Federal Communications Commission ("FCC"). The FCC is the principal federal agency responsible for fostering reliable, universally available telecommunications services, as well as competition and growth in the communications and related Internet services industries.2 A wide range of FCC policies, proceedings, and capabilities were implicated by the accounting fraud and resulting bankruptcy of WorldCom. At that time, WorldCom was the second largest long-distance carrier, one of the largest competitive local exchange carriers, and the largest provider of Internet backbone services.3 WorldCom held numerous FCC licenses for landline and wireless services. During the quarter century prior to the disclosure of4 fraud, advocacy by WorldCom and MCI Communications Corp. ("MCI") 1. Press Release, WorldCom, WorldCom Announces Intention to Restate 2001 and First Quarter 2002 Financial Statements (June 25, 2002), http://global.mci.conca/news/ ca_archive02.xml (follow "WorldCom Announces Intention to Restate 2001 and First Quarter 2002 Financial Statements" hyperlink) [hereinafter WorldCom Press Release]; DENNIS BERESFORD ET AL., REPORT OF INVESTIGATION BY THE SPECIAL INVESTIGATIVE COMMITTEE OF THE BOARD OF DIRECTORS OF WORLDCOM, INC. 1 (2003), http://news. findlaw.com/hdocs/docs/worldcom/bdspcomm6O903rpt.pdf [hereinafter INVESTIGATION REPORT]. The restated financials for 2000 and 2001 included impairment charges (write- downs of goodwill and certain other assets) totaling $59.8 billion and $4.8 billion of charges to pretax income to correct line costs (a category of operating expenses) that had been reduced either by improper capitalization or inappropriate reductions to reserves. Infra Part II.A. 2. See Nat'l Cable & Telecomms Ass'n v. Brand X Internet Servs., 125 S. Ct. 2688, 2695-98 (2005) (stating that the FrCC ik reponsible for nmnting the g--th of Intn-te and advanced services); Verizon Comm. v. FCC, 535 U.S. 467, 475-77 (2002) (stating that the FCC is responsible for promoting competition in local telecommunications services); Tex. Office of Pub. Util. Counsel v. FCC, 183 F.3d 393, 405-07 (5th Cir. 1999) (stating that the FCC is responsible for promoting universal telecommunications services); see generally Communications Act of 1934, ch. 652, 48 Stat. 1064 (codified as amended at scattered sections 47 U.S.C.). 3. See INDUS. ANALYSIS & TECH. Div., FCC, STATISTICS OF THE LONG DISTANCE TELECOMMUNICATIONS INDUSTRY 7, 16-17 (2003), http://www.fcc.gov/Bureaus/Common _Carrier/Reports/FCC-State Link/IAD/ldrpt103.pdf; Complaint, United States v. WorldCom and Sprint Corp. (D.D.C. filed June 27, 2000), at 4-7, http://www.justice.gov/ atr/caseslf5000505 l.pdf; J. Gregory Sidak, The Failureof Good Intentions: The WorldCom Fraud and the Collapse of American Telecommunications After Deregulation, 20 YALE J. ON REG. 207, 227 (2003). 4. WorldCom acquired MCI in 1998. See Application of WorldCom, Inc. and MCI Communications Corp. for Transfer of Control of MCI Communications Corp. to WorldCom, Inc., Memorandum Opinion and Order, 13 F.C.C.R. 18025, para. 1 (1998). At times between 1998 and 2002, the company was named "MCI WorldCom, Inc." and was renamed "WorldCom, Inc." To avoid confusion, this Article refers to the post-acquisition company as "WorldCom." FEDERAL COMMUNICATIONS LA W JOURNAL [VOL. 58 5 reshaped telecommunications regulations. The FCC's regulations did not cause, prevent, detect, or remedy the criminal conduct at WorldCom. However, the FCC's rules required WorldCom to file accurate financial information and to show that it had the financial and character qualifications necessary to hold radio and other FCC licenses. With broad statutory authority to require information filings and perform investigations of telecommunications carriers, the agency with telecommunications industry expertise might have done more to detect and protect the public against harms from financial fraud at major telecommunications carriers such as WorldCom, Qwest Communications 7 8 International, Inc. ("Qwest"),
Recommended publications
  • Enron and One.Tel: Employee Entitlements After Employer Insolvency in the United States and Australia - (Australian Renegades Championing the American Dream)

    Enron and One.Tel: Employee Entitlements After Employer Insolvency in the United States and Australia - (Australian Renegades Championing the American Dream)

    SMU Law Review Volume 56 Issue 2 Article 10 2003 Enron and One.Tel: Employee Entitlements after Employer Insolvency in the United States and Australia - (Australian Renegades Championing the American Dream) Louise W. Floyd Follow this and additional works at: https://scholar.smu.edu/smulr Recommended Citation Louise W. Floyd, Enron and One.Tel: Employee Entitlements after Employer Insolvency in the United States and Australia - (Australian Renegades Championing the American Dream), 56 SMU L. REV. 975 (2003) https://scholar.smu.edu/smulr/vol56/iss2/10 This Article is brought to you for free and open access by the Law Journals at SMU Scholar. It has been accepted for inclusion in SMU Law Review by an authorized administrator of SMU Scholar. For more information, please visit http://digitalrepository.smu.edu. ENRON AND ONE.TEL: EMPLOYEE ENTITLEMENTS AFTER EMPLOYER INSOLVENCY IN THE UNITED STATES AND AUSTRALIA (AUSTRALIAN RENEGADES CHAMPIONING THE AMERICAN DREAM?) Louise W. Floyd* Enron 401(k) Chief Defends Handling of Plan, Discloses He Sold Stock in June -The Wall Street Journal, February 8, 2002.' Scandal of unpaid workers-The One. Tel Meltdown -The Australian, June 6, 2001.2 ARGE-scale corporate collapse is, sadly, a familiar problem in the United States and Australia. The issues raised by such calamities, in terms of corporate governance and accounting standards, are being addressed by articles in the fall edition of this journal that deal with * Barrister, Supreme Courts of New South Wales and Queensland; Lecturer in Law, T.C. Beirne School of Law, The University of Queensland, Australia. The author wishes to thank the many people who enriched her life and understanding of American law and culture throughout her 2002 sabbatical to the United States, during which time this article was written.
  • Building a Transatlantic Digital Marketplace: Twenty Steps Toward 2020

    Building a Transatlantic Digital Marketplace: Twenty Steps Toward 2020

    Building a Transatlantic Digital Marketplace: Twenty Steps Toward 2020 Report of the Atlantic Council Task Force on Advancing a Transatlantic Digital Agenda Co-Chairs: H.E. Carl Bildt The Hon. William E. Kennard Project Director: Frances G. Burwell Rapporteur: Tyson Barker Building a Transatlantic Digital Marketplace: Twenty Steps Toward 2020 Report of the Atlantic Council Task Force on Advancing a Transatlantic Digital Agenda Co-Chairs H.E. Carl Bildt The Hon. William E. Kennard Project Director Frances G. Burwell Rapporteur Tyson Barker ISBN: 978-1-61977-943-3 This report is written and published in accordance with the Atlantic Council Policy on Intellectual Inde- pendence. The authors are solely responsible for its analysis and recommendations. The Atlantic Council and its donors do not determine, nor do they necessarily endorse or advocate for, any of this report’s conclusions. March 2016 Table of Contents Foreword...................................................................................................................................................v Note from the Co-Chairs ..........................................................................................................................vii Task Force on Advancing a Transatlantic Digital Agenda .....................................................................ix Executive Summary .................................................................................................................................1 Redefning the Rules of Digital Trade......................................................................................................11
  • A Brief History of Net Neutrality

    A Brief History of Net Neutrality

    A Brief History of Net Neutrality Professor Daniel Lyons, Boston College Law School 71st NECPUC Annual Symposium May 21, 2018 Origins: 1996 Telecommunications Act “Today, with the stroke of a pen, our laws will catch up with our future.” --President Bill Clinton, signing the 1996 Telecommunications Act Origins: 1996 Telecommunications Act Title I Title II Title III Title VI Information Telecom Wireless Cable Services Services Services Services Lightly Common Licensing Local Regulated Carriage Franchising Example: Example: Example: Example: Voicemail Telephone Broadcast Cable TV What About the Internet? • 1996: only 50% of Americans have Internet Access • Act mentions Internet almost entirely in context of regulating online pornography • Mentions Broadband only once What About the Internet? “I want to create an oasis from regulation in the broadband world, so that any company, using any technology, will have incentives to deploy broadband in an unregulated or significantly deregulated environment.” --FCC Chairman William Kennard 1999 What About the Internet? Title I Title II Title III Title VI Information Telecom Wireless Cable Services Services Services Services Lightly Common Licensing Local Regulated Carriage Franchising Example: Example: Example: Example: Voicemail Telephone Broadcast Cable TV City of Portland, Oregon (1999) Title I Title II Title III Title VI Information Telecom Wireless Cable Services Services Services Services Lightly Common Licensing Local Regulated Carriage Franchising Example: Example: Example: Example: Voicemail
  • A Case of Corporate Deceit: the Enron Way / 18 (7) 3-38

    A Case of Corporate Deceit: the Enron Way / 18 (7) 3-38

    NEGOTIUM Revista Científica Electrónica Ciencias Gerenciales / Scientific e-journal of Management Science PPX 200502ZU1950/ ISSN 1856-1810 / By Fundación Unamuno / Venezuela / REDALYC, LATINDEX, CLASE, REVENCIT, IN-COM UAB, SERBILUZ / IBT-CCG UNAM, DIALNET, DOAJ, www.jinfo.lub.lu.se Yokohama National University Library / www.scu.edu.au / Google Scholar www.blackboard.ccn.ac.uk / www.rzblx1.uni-regensburg.de / www.bib.umontreal.ca / [+++] Cita / Citation: Amol Gore, Guruprasad Murthy (2011) A CASE OF CORPORATE DECEIT: THE ENRON WAY /www.revistanegotium.org.ve 18 (7) 3-38 A CASE OF CORPORATE DECEIT: THE ENRON WAY EL CASO ENRON. Amol Gore (1) and Guruprasad Murthy (2) VN BRIMS Institute of Research and Management Studies, India Abstract This case documents the evolution of ‘fraud culture’ at Enron Corporation and vividly explicates the downfall of this giant organization that has become a synonym for corporate deceit. The objectives of this case are to illustrate the impact of culture on established, rational management control procedures and emphasize the importance of resolute moral leadership as a crucial qualification for board membership in corporations that shape the society and affect the lives of millions of people. The data collection for this case has included various sources such as key electronic databases as well as secondary data available in the public domain. The case is prepared as an academic or teaching purpose case study that can be utilized to demonstrate the manner in which corruption creeps into an ambitious organization and paralyses the proven management control systems. Since the topic of corporate practices and fraud management is inherently interdisciplinary, the case would benefit candidates of many courses including Operations Management, Strategic Management, Accounting, Business Ethics and Corporate Law.
  • Official Versions Vs Facts

    Official Versions Vs Facts

    1 This text below is inspired by a translation from a French text that was published on the website of Paul Jorion in late June 2017, ie about only 2 weeks after this website would go live. I answered here a very straight question: “how do you differ from the official version?” And here is my “story”, the only one that have conveyed since 2012. It was then meant to summarize how my website differs from all the reports that the bank and the authorities have made on the “London Whale” case. It was 143 pages long for Paul Jorion. Now it is 29 pages long. What I have added are further details on key topics like ‘profits’, like ‘orders’, like ‘valuation’, like ‘mismarking’…. Needless to say, this account vastly differs from any media reporting although some outlets are closer than others. This text below thus predated by a month or so the decisions of the DOJ as disclosed on July 21st 2017. It may well have been the “recent statements and writings” that would shake the tree. It contradicted ahead of times the WSJ subsequent article of August 3rd 2017. Yet it corroborated the statements of Dimon on August 8th 2017 to some extent and clarified ahead of times the context of the ultimate decision of the SEC in late August 2017. But, back in June 2017, this text was also displaying my ‘story’ as an anchor amid all the changing stories that would have been conveyed since 2012 and onwards… In sharp contrast to what all the authorities and the bank would do between 2012 and 2018, I will deploy only one “story” to tell all along, be that on the public stage or confidentially towards the authorities.
  • The Pattern of Fraudulent Accounting : Ethics, External Auditing and Internal Whistle-Blowing Process

    The Pattern of Fraudulent Accounting : Ethics, External Auditing and Internal Whistle-Blowing Process

    Journal of Governance and Regulation / Volume 5, Issue 4, 2016 THE PATTERN OF FRAUDULENT ACCOUNTING : ETHICS, EXTERNAL AUDITING AND INTERNAL WHISTLE-BLOWING PROCESS Loredana Ferri Di Fabrizio * * University “Gabriele d’Annunzio”, Chieti-Pescara, Italy Abstract How to cite this paper: Ferri Di The ongoing debate in the literature centres on the compromised Fabrizio, L., (2017). The Pattern Of auditor’s independence in consequence of the relevant provisions Fraudulent Accounting : Ethics, External Auditing And Internal Whistle-Blowing perceived for non-audit services provided to the audited clients. Process. Journal of Governance and The accounting scandals that have occurred over the past two Regulation, 6(1), 12-25. decades show the lack of competence and independence of external http://dx.doi.org/10.22495/jgr_v6_i1_p2 auditors, who kept quite in the face of attempted frauds. The case Copyright © 2017 The Author of Tesco represents an undeniable example of the loss of auditor’s independence, who failed to detect accounting manipulation This work is licensed under the Creative Commons Attribution-NonCommercial confirming the importance of whistle-blowing procedures in 4.0 International License (CC BY-NC 4.0) disclosing concerns before they become serious problems. When http://creativecommons.org/licenses/b turnover occurs in CEOs it is more likely that a rotation in external y-nc/4.0/ auditors occurs as well. Finally, changes in top management enable ISSN Online: 2220-9352 whistle-blowing actions to be successful, interrupting the ISSN Print: 2306-6784 organization’s dependence on serious wrongdoings and preventing Received: 26.11.2016 a disastrous ending. The success of whistle-blowing in preventing Accepted: 20.12.2016 company failure makes it an effective instrument of сorporate пovernance.
  • Working Paper

    Working Paper

    No. 11-46 November 2011 WORKING PAPER THE FEDERAL COMMUNICATION COMMISSION’S EXCELLENT MOBILE COMPETITION ADVENTURE By Thomas W. Hazlett The ideas presented in this research are the author’s and do not represent official positions of the Mercatus Center at George Mason University. The Federal Communication Commission‘s Excellent Mobile Competition Adventure Thomas W. Hazlett1 I. INTRODUCTION Stressed-out undergrads meet deadlines for term papers by cramming facts, figures, and buzzwords; splicing Wikipedia entries; pasting select expert quotations; citing everything twice; inserting some nifty, multi-color pie charts—and hoping that the professor notes the paper‘s girth but not its (lack of) substance. If such a paper says anything at all, the student is unaware of it. Yet it does not overshoot the cosmic probability table that an all-nighter pays off and someone, somewhere, learns something. Welcome to the Federal Communications Commission‘s 15th Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, released June 27, 2011. The FCC Report makes mistakes with the Commission‘s own data.2 It contains typos.3 It omits crucial, relevant, and available facts. It wastes page after page discussing tangential issues.4 Indeed, the Report avoids discussing the state of ―effective competition‖ in what is entitled an ―analysis of competitive market conditions.‖ With just 308 pages, 1,306 footnotes, 6 appendices, and 18 years to prepare its templates and hone its analysis (since Congress mandated annual FCC reports), the agency cannot make up its mind. Of course, regulators want to keep their options open. If they deem the industry ―effectively competitive,‖ that might imply that regulatory interventions were unwarranted.
  • The Dual Jurisdiction of the Fcc and the Justice Department Over Telecommunications Transactions

    The Dual Jurisdiction of the Fcc and the Justice Department Over Telecommunications Transactions

    SERVING Two MASTERS: THE DUAL JURISDICTION OF THE FCC AND THE JUSTICE DEPARTMENT OVER TELECOMMUNICATIONS TRANSACTIONS James R. Weiss Martin L. Stern* I. INTRODUCTION reaction that followed the Justice Department an- nouncement, the FCC's decision was cheered by On April 22, 1996, Bell Atlantic Corporation many critics of the DOJ's decision, and was de- and NYNEX Corporation announced their plans scribed as the action "where [the] Justice [Depart- 5 to form the largest local telephone company in ment] failed to act." the United States with 141,000 employees in thir- The contrasting decisions of the DOJ and the teen states and the District of Columbia, 39 mil- FCC regarding the Bell Atlantic/NYNEX merger lion lines, $53.3 billion in assets, and $3.4 billion illustrate the confusing and unpredictable nature estimated annual profits.' After enormous ef- in of dual agency review of telecommunications forts by the merging parties and the reviewing mergers. Despite years of precedent and the federal agencies-the Antitrust Division of the existence of so-called guidelines, telecommunica- U.S. Department of Justice ("DOJ" or 'Justice De- tions merger review remains an ad hoc process. partment") and the Federal Communications In general, one would think that the antitrust Commission ("FCC" or "Commission")-the two agencies reached opposite conclusions. activities of the FCC and the DOJ do not com- Approximately one year after the Bell Atlantic/ pletely overlap. In many respects, as the agency NYNEX merger was announced, the DOJ issued a responsible for telecommunications policy, the two sentence press release stating that it would FCC's antitrust activities are prospective, establish- not challenge the transaction.
  • Creative Accounting, Fraud and International Accounting Scandals

    Creative Accounting, Fraud and International Accounting Scandals

    Creative Accounting, Fraud and International Accounting Standards Michael Jones University of Bristol [email protected] 1 Overview • Based on Book: Creative Accounting, Fraud and International Accounting Scandals • Investigates nature of creative accounting and fraud • Examines history of accounting scandals • Looks at creative accounting, fraud and accounting scandals in 13 countries worldwide • Focus on political aspects 2 Creative Accounting 3 Two Quotes “How do you explain to an intelligent public that it is possible for two companies in the same industry to follow entirely different accounting principles and both get a true and fair audit report?” M. Lafferty “Every company in the country is fiddling its profits”. I. Griffiths 4 Definitions 1. Fair Presentation Using the flexibility within accounting to give a true and fair picture of the accounts so that they serve the interests of users 5 Definitions 2. Creative Accounting Using the flexibility within accounting to manage the measurement and presentation of the accounts so that they serve the interests of preparers 6 Definitions 3. Impression Management Using the flexibility of the accounts (especially narrative and graphs) to convey a more favourable view than is warranted of a company’s results serving the interests of preparers 7 Definitions 4. Fraud Stepping outside the Regulatory Framework deliberately to give a false picture of the accounts 8 Definitions No Flexibility to give Flexibility to Flexibility to Flexibility a “true and fair“ give a give a view creative view fraudulent view Regulatory Working within Working within Working framework regulatory regulatory framework outside eliminates framework to ensure to serve preparer’s regulatory accounting choice users’ interests interests framework Within regulatory framework Outside regulatory framework 9 Managerial Motivation 1.
  • 2 Bureaucratic Autonomy: Logic, Theory, and Design 18 2.1 Introduction

    2 Bureaucratic Autonomy: Logic, Theory, and Design 18 2.1 Introduction

    Charting a Course to Autonomy: Bureaucratic Politics and the Transformation of Wall Street by Peter Joseph Ryan A dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Philosophy in Political Science in the GRADUATE DIVISION of the UNIVERSITY OF CALIFORNIA, BERKELEY Committee in charge: Professor Paul Pierson, Chair Professor J. Nicholas Ziegler Professor Neil Fligstein Spring 2013 Charting a Course to Autonomy: Bureaucratic Politics and the Transformation of Wall Street Copyright c 2013 by Peter Joseph Ryan Abstract Charting a Course to Autonomy: Bureaucratic Politics and the Transformation of Wall Street by Peter Joseph Ryan Doctor of Philosophy in Political Science University of California, Berkeley Professor Paul Pierson, Chair Over the past three decades, federal regulators have been at the heart of transformations that have reshaped the financial services industry in the United States and by definition, global markets. It was, for example, the Federal Reserve that initiated and developed risk- based capital standards, rules that are now at the heart of prudential regulation of financial firms across the globe. Federal regulators played a central role in preventing regulation of the emerging ‘over-the-counter’ derivatives market in the late 1980s and early 1990s, actions that later had dramatic consequences during the 2007-2008 financial crisis. The Securities and Exchange Commission took critical decisions regarding the prudential supervision of investment banks, decisions that greatly contributed to the end of the independent invest- ment banking industry in the United States in 2008. Finally regulators played an important role in setting the agenda and shaping the outcomes of the Dodd-Frank Wall Street Reform Act of 2010, the most sweeping and comprehensive piece of legislation affecting the industry since the New Deal.
  • Auditing Techniques to Avoid Cost Accounting Frauds

    Auditing Techniques to Avoid Cost Accounting Frauds

    Volume 7 No 2 (2018) | ISSN 2158-8708 (online) | DOI 10.5195/emaj.2018.134 | http://emaj.pitt.edu Auditing Techniques to Avoid Cost Accounting Frauds Vedat Akman Beykent University, Turkey | [email protected] Berkan Acar Yalova University, Turkey | [email protected] Cevdet Kızıl Istanbul Medeniyet University, Turkey | [email protected] Volume 10 No 1 (2020) | ISSN 2158-8708 (online) | DOI 10.5195/emaj.2020.210 | http://emaj.pitt.edu |Abstract Today, we observe the importance of accuracy of financial statements in every corporation. Accounting scandals have caused important losses both in the macro and micro levels. This issue proves the significance of financial statement accuracy. This accuracy is provided by the trust environment. Therefore, it is necessary to provide the required environment of confidence for financial markets to improve and function effectively against increasing accounting frauds gradually. That can only be possible by using different auditing techniques, running inventory counting such as cash and stock, establishing strong internal controls, managing efficiently and benefiting from technology integrated auditing. The aim of this study is to investigate the most effective auditing techniques to avoid cost accounting frauds. In this research, the most effective auditing techniques for detecting and preventing fraud are investigated by using the case analysis method. Also, the well known scandals related with Olympus, Worldcom, Tesco, Sunbeam and Parmalat companies are examined as a part of the case analysis. Finally, recommendations and suggestions regarding fraud prevention methods are presented. Keywords: Accounting, Cost Accounting, Auditing, Scandals, Fraud New articles in this journal are licensed under a Creative Commons Attribution 3.0 United States License.
  • In Light of the Recent Corporate Accounting Scandals, Business

    In Light of the Recent Corporate Accounting Scandals, Business

    International Business & Economics Research Journal – February 2007 Volume 6, Number 2 Corporate Ethics: China vs. USA Peng S. Chan, (E-mail: [email protected]), California State University, Fullerton Dennis Pollard, (E-mail: [email protected]), California State University, Fullerton Shirley Chuo, (E-mail: [email protected]), American InterContinental University ABSTRACT Fairness is one of the basic aspects of business exchange. Ethics are principles used to establish fairness. This study will look at background and origins for different American and Chinese ethical beliefs. It is important for U.S. and Chinese firms to understand each other’s cultural perspectives, especially as the Chinese market opens up. Methods to resolve ethical conflict will be reviewed. Business agents from both cultures can relate and deal with each other if they have the knowledge, skills, and patience to do so. This study builds on prior research that suggests that younger Chinese are more concerned with profit than with abiding by regulations or adhering to corporate ethics. The major argument of this study is that future Chinese business leaders, born after China’s one- child policy was implemented in 1979, will be primarily concerned with self-interest and making decisions that will benefit them individually. Guanxi (interpersonal connections or human relationships), corporate ethics and social responsibility (CESR) beliefs will be reduced in importance and influence. American managers should incorporate this information when formulating a “China strategy”. INTRODUCTION ne of the most fundamental aspects of business is fairness. When two parties meet to transact business each desires to obtain a product that is of least equal value for the item they are exchanging.