Accounting Scandals and Their Effects

Transcription

Accounting Scandals and Their Effects
CEU Business School
Central European University
MSC IN FINANCE
Accounting scandals and their effects (1.5
credits)
Instructor:
Ms Laura Ipacs
Classroom:
Office:
Tel:
E-mail:
[email protected]
Office hours: To be advised or by appointment.
Academic Advisor:
Students Services Mgr.:
Aniko Juhasz ([email protected])
1. PREREQUISITIES
Accounting
2. REQUIRED TEXT AND READINGS
Case studies and handouts will be distributed before and during the course.
Some recommended readings for this course are:
Barbara Ley Toffler: Final Accounting (Ambition, greed and the fall of Arthur
Andersen) , Doubleday, 2004
Mike Brewster: Unaccountable: How the Accounting Profession Forfeited a Public
Trust (Wiley, 2003)
Reinhart-Rogoff: This time is different (Eight Centuries of Financial Folly),
Princeton, 2009
1
Jane Gleeson – White: Double Entry: How the Merchants of Venice created Modern
Finance (2013)
Jane Gleeson – White: Six Capitals, or Can Accountant Save the Planet? (2015)
Michael Woodford: Exposure (Inside the Olympic Scandal: How I went from CEO to
Whistleblower), 2014
3. COURSE DESCRIPTION AND OBJECTIVES
Hundreds of millions of shareholder money lost, jobs gone, a respectable 90-year-old
accounting firm collapsing within months…Trust all gone in accountants and
accountability?
Finance has undergone dramatic changes in the past decade. Finance issues are on the
agenda of all business leaders, whether practising finance professionals or not.
Accounting scandals of a large scale have shocked and will probably continue to
shock the business world. We talk about pre-Enron and post-Enron eras to
demonstrate the impact of scandals on the business community.
This course is designed to provide an in-depth understanding of ethical issues of
finance decisions, the origins of the recent crisis, the nature of accounting scandals
and the current developments in financial regulation and reporting as a consequence.
4. INSTRUCTOR’S PERSONAL NOTE
I was a practicing accountant for several years, and as such, have been touched by
unethical behavior in organisations, big and small. I have seen the temptations and
the pressure that could easily lead to errors, and even fraud. We must meet the
quarterly targets: this has been the mantra of major corporations for the last
century. Nobody is immune of unaffected.
Why do we call such scandals ‘accounting’ scandals? Whereas ‘creative’ is
usually a positive characteristic, when used in relation to accountants, it loses all
its positivity. So are they special?
I have had a major interest in the topic for several years. My auditor friends are
some of the most hardworking people I have ever known: how come they are
incapable of preventing misrepresentations?
So how can we secure our investments and pensions? Is there a possibility?
5. MAIN TOPICS
•
•
•
•
•
Why accounting scandals happen – intentional or accidental events? Do
they matter at all?
The professional and ethical duties of the accountant and the international
financial reporting framework - are they living up to it?
Reporting the financial performance of entities – for whom and by whom?
Tyranny of numbers: expectations of ‘making the numbers’ and their
consequences in life and business
Implications of changes in regulation on accounting - Sarbanes Oxley and
its consequences
2
•
The biggest: a Top 5 selection of Accounting scandals and their
consequences – what happened and how much was lost?
6. INTENDED LEARNING OUTCOMES
The most important aim of this course is to develop students’ critical
awareness and ability to evaluate the ethical issues in finance and
consequences of financial decisions.
Describe and explain the language, concepts and use of financial accounts and
reports.
Demonstrate a sound understanding of the significance of accounting
information systems for both effective financial reporting and good corporate
governance and demonstrate a systematic understanding and thorough
appreciation of the regulatory framework for the preparation and presentation
of financial statements.
Understand the cultural elements in an organisation which might lead to fraud
and how to prevent these
Interpret and critically analyse corporate financial accounts and reports
reflecting on the limitations of both published accounts and standard analytical
techniques.
Describe and explain the relationship between financial reporting and
corporate governance.
6. ACADEMIC INTEGRITY
The Business School expects all students to adhere to the fundamental principles of
academic integrity in all behavior associated with their course work, as stated in the
CEU Honor Code (see Student Handbook). Cheating on the final exam or minute
papers will not be tolerated in this class, and will be punished to the maximum extent
permitted under CEU rules.
7. COURSE OUTLINE AND SESSION ASSIGNMENTS
S1
S2
S3
Accountants: what impact have they had on the world?
The professional and ethical duties of the accountant – what are the requirements and how
are they met in practice?
Putting auditors under pressure: how and why?
Professional behaviour and compliance with accounting standards - how are they related?
The elements of fraud and fraudulent behavior: the accidental and the predator fraudster
Users and their needs – how financial statements meet the requirements and what are the
circumstances of their preparation
Trust and credibility: how to keep them? What are the consequences of reputational loss?
The difficulties inherent in accounting estimates: Enron, and its details. What went on and for
how long? What in the culture of Enron led to the fraud?
Life after Enron: Sarbanes - Oxley and other legislation and how it continues to impact
accountants, investors, and the US capital markets
Faking a company: ZZZZBest and the US public: how could it have happened?
3
S4
S5
S6
How has Barry Minkow changed the audit scene? From Wunderkind to prison in California
Conflicts of interest in the public accounting profession: what created them and how can they
be overcome?
Governance and culture clashes: Olympus and its whistleblower
Is an accounting scandal about accounting? Who really is behind and how can they be
stopped?
Hiding stories in the Financial Statements: what to look for and how
Tesco and its reports: ‘aggressive accounting’ and its limits
Tyranny of numbers: who rules who?
Where and how will it stop?
The end of empires: Lehman Brothers and Bernie Madoff
Too big to fail? Under the watchdog? Financial scandals on Wall Street: who pays?
Who can be prosecuted and how?
Accountants will save the planet: the new reporting revolution underway: how could it
change the rules of the game?
Teaching ethics: is it possible? Will it make us more ethical?
Stories - but why do they matter? Are we all in the game? Who sets the rules?
Summary, conclusions and final test
8. GRADING AND ASSESSMENT
The assessment for the course comprises of 3 parts, with their respective weights
detailed below:
30% class attendance and class participation
30% case preparation and presentation
40% final exam
Grading is based on the total score in line with standard grading patterns at CEU.
There is ONE closed book final comprehensive exam for this course.
Homework will be divided between respective student groups where you will be
expected to discuss and address the questions prior to each class session. Students
present their discussions/findings/calculations during the seminar sessions. Each
group member should stand ready to present where they will be randomly called upon
to do so.
Adequate class participation is required for passing the class. You will be called
upon to participate or contribute to classwork discussions if your participation score
has been inadequate (or non-existent).
4