Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: William H Huebl who wrote (34769)	12/2/1998 6:49:00 AM
From: robnhood	Read Replies (2) \| Respond to of 94695

Hope you're right Bill, I'm short russell

To: William H Huebl who wrote (34769)	12/2/1998 7:22:00 AM
From: flickerful	Read Replies (1) \| Respond to of 94695

big surprise here, folks. buoy share prices ? disguise losses? what, me worry? from the venerable financial times, 1 december 98. ft.com FRAUD: Managers guilty of "hocus pocus" By Jim Kelly Most big frauds are committed by the management of companies, involve no actual theft and are unlikely to be uncovered by the statutory auditor that checks the accounts, according to research published today. The Auditing Practices Board, the audit regulator, suggests that changes in the law could be used to make shareholders, companies and directors more responsible for stopping fraud. The report comes as the government begins its root-and-branch review of company law that could result in radical proposals to spread more widely the corporate governance duties of those involved in running a company. The APB suggests more suspected frauds should be reported and hopes to begin a debate on the way financial regulators could respond properly when an auditor has suspicions about a company. The board was given confidential access to data on 23 big frauds by the Serious Fraud Office. In 14 cases the fraud materially affected the accounts and in all those cases senior management played a role. "Directors or other senior management were actively involved in most of the major frauds included in the survey," said Ian Plaistowe, chairman of the board and a senior auditor with Arthur Andersen. "Our study indicates most of the major cases to which the term fraud has been applied do not involve direct financial gain for the perpetrators or direct financial loss to the company," he added. In 65 per cent of the cases the fraud involved mis-statement of financial data for a variety of motives including to buoy up the share price and disguise losses. "In these cases the fraud was by the company not against the company." The research supports those who think companies face dangerous pressures to meet market expectations. Arthur Levitt, chairman of the US Securities and Exchange Commission, recently attacked accounting "hocus pocus" used to hoodwink the market. The APB paper suggests company managements are enticed into bending accounting rules to meet targets. They finally find they must break the rules so that previous sharp practice is not exposed as reality gets increasingly out of kilter with the bogus accounts. Auditors, who believe there is an expectation gap between what they can achieve and what the public expects, complain they have to rely on management information when completing an audit. They also come under pressure of time as managements withhold information ahead of the day that the market expects results. A decision to delay publication would seriously damage shareholder interests - at least in the short term. "Auditors are not in a position to express concerns about the quality of evidence available to them unless such concerns can be demonstrated with near certainty," said John McGill, chairman of the working party that produced the report. In the past APB has suggested reforms but ran into considerable opposition, especially from companies. In the cases in the survey the cost of investigating and prosecuting the fraud was 10 times the audit costs.