How Many Companies Are Cooking the Books?

Discussion in 'Stocks' started by Nobert, Jun 26, 2020.

  1. Nobert

    Nobert

    Eric McWhinnie Google+ Twitter
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    May 10, 2013

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    A combination of sluggish growth, complacency, and outright greed is leading to a “do whatever it takes” mentality in the business world — even if that means cooking the books or conducting other acts of fraud.

    Out of almost 3,500 employees polled in 36 countries around the globe, one in five admit to being aware of financial manipulation in their own companies over the past year, according to the latest survey from Ernst & Young. Furthermore, 42 percent of board directors and top managers were aware of irregular financial reporting at their employers. The regions in the survey include: Europe, the Middle East, Africa, and India.

    The amount of fraud is more pronounced in high-growth markets, where over 25 percent of respondents are witnessing financial manipulation. Almost 50 percent of respondents in these areas believe that companies in their countries often deceive when it comes to financial performance, compared to 29 percent in Western Europe.

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    Brian Loughman, Americas Leader of Fraud Investigation & Dispute Services for the global Ernst & Young organization says, “For U.S.-based executives responsible for businesses in these regions, such findings should be cause for concern. The possibility of inaccurate financial reporting to headquarters, or corrupt payments being made to secure sales, undermines the parent company and could expose it to enforcement action by regulators.”

    The survey also finds that the overall business environment is quite corrupt. Fifty-seven percent of all respondents believe bribery and corruption are widespread in their country. This figure rises to 67 percent in rapid-growth markets. Twenty-six percent of people polled said they feel it is common practice to use bribery to win contracts in their own sector.

    Loughman says, “Given the economic volatility and financial stresses being felt in many of these markets, revisiting existing risk assessments is a prudent measure. Today’s survey findings regarding conduct in some of the most important overseas markets for U.S. business should provide a fresh and urgent impetus to these fraud and bribery risk mitigation efforts.”

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    The United States was not included in this year’s survey, as the focus was on Europe and growth countries. However, Arkansas-based Wal-Mart (NYSE:WMT) became the center of attention late last year. Bribery allegations materialized after The New York Times published two reports that detailed the financial incentives given to Mexican officials by the company’s affiliate, Wal-Mart de Mexico. One of the largest was a $52,000 bribe paid to change a zoning map so that the retailer could open a store located near ancient pyramids in Teotihuacan. Evidence was also uncovered that contradicts statements made by the company after the Times story was published.

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    Wal-Mart’s bribery case fails in comparison to the recent Libor scandal, in which at least three major banks – and perhaps as many as 16 banks – have been manipulating worldwide interest rates on financial securities worth more than $300 trillion. The Royal Bank of Scotland (NYSE:RBS), Switzerland’s UBS (NYSE:UBS), and Britain’s Barclays (NYSE:BCS) have all agreed to pay minimal fines for their involvement. Other major banks such as JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C) are also under investigation.


    While most of the respondents in the Ernst & Young survey are aware that their employer has an anti-bribery/anti-corruption policy, its effectiveness is clearly in doubt. Sixty percent of directors and senior managers believe their company would support whistleblowers, but only 34 percent of other employees agree.

    Loughman concludes, “Instilling a commitment to ethical conduct across a global organization is a daunting task. Establishing a rigorous compliance program, appropriately tailored to the industry sector and operating geographies, is a start. But companies need to continually challenge themselves on the practical aspects of their compliance programs if they are to effectively manage the risk of fraud, bribery and corruption. The efficacy of existing training programs should be reviewed, and the internal audit function challenged on whether forensic data analytics are being adequately employed to mitigate these complex risks.”

    Source :
    https://www.cheatsheet.com/uncategorized/how-many-companies-are-cooking-the-books.html/
     
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  2. Atikon

    Atikon

    I did an analysis on real Earnings Management shortly before Delistings, no significant results at least for German Companies. Earnings Management via Accruals is detected easily and priced in almost immediatley. Fair Value Valuation opens up a lot of room for negotiation, which is where the most bodies are buried, but I believe it's more within the finance sector. Once the auditor is locked in on a valuation, it takes a real good employee to get him off the case. The latter are mostly employed in the best paying industries
     
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  3. %%
    Impossible to know, Nobert;
    but eventually it shows up on price charts.
    In USA, SEC catches some, short sellers catch some, lawyers sue some, Carl Ichan catches some. CHK ceo ran his auto in a concrete wall/dead duck...…………………………...
    Its not something I worry about; but I moniter price charts
     
    Nobert likes this.
  4. Nobert

    Nobert

    Ofcourse, the only thing that ,,warms my heart'', is that those whistle-blower award prizes gets bigger every year. Fight fire with fire.

    Talking about Icahn, looks like IEP could be a nice long for a year or two.
    (based on technicals only, don't like their numbers that much)
     
    Last edited: Jun 26, 2020
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  5. %%
    Mr Ichan tends to do very well/many years. He moved to FLA= lower taxes/warm weather.Amen………………………………………………………………………..
     
    Nobert likes this.
  6. Nobert

    Nobert

    Aaa, better choice then Texas imo, except for alligators :D

    Different coast, but will do :

     
    murray t turtle likes this.
  7. %%
    LOL;
    TX has what they call ''alligator gar'' /LOL
     
    Nobert likes this.
  8. JSOP

    JSOP

    There are also off-balance sheet activities and non-arms length transactions. The former would depend on their willingness and competence in adopting GAAP and the latter is good investigative journalism. But all in all, do you REALLY want to hold companies to higher more ethical standards when conducting businesses in regions of Eastern Europe, Middle East, Africa and India when everybody is playing by a different rule? When you are in Western Europe and North America where it's a different business environment and culture, of course you can adhere to a higher ethical standard for the benefit of all, but when you are in those regions, you either play by their rule or you lose out to the Chinese. One day when the Chinese really took over the world, you have to play by their rule anyway.

    But not everything is at loss.
    Sometimes unforeseen forces is the best way to combat corruption and bribery. I hope that Walmart is not going to be haunted by ancient Aztec curses.
     
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  9. ironchef

    ironchef

    I am not condoning Walmart bribery or monopolistic practice like AMZN, GOOG, FB... to gain an unfair advantage, but they are different animals than cooking the book, generating fake income, fake sales and fake assets.

    In the former, company likely will not collapse, shareholder will not lose their shirts, whereas in the later, invariably company will collapse, ceases to exist and shareholders wipe out.
     
    Nobert likes this.
  10. 931

    931

    Its normal , even before i knew anything about stocks or had made any trade.
    First thought was knowing what we know about human nature the books are probably cooked.
     
    #10     Jun 27, 2020
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