Forensic Accounting and Financial Statement Fraud, Volume II by Dr. Zabihollah Rezaee

Author:Dr. Zabihollah Rezaee [Dr. Zabihollah Rezaee]
Language: eng
Format: epub
Publisher: Business Expert Press
Published: 2019-04-02T16:00:00+00:00

Antifraud Role of Management

The board of directors of public companies as representative of shareholders appoints the management team heading by the CEO and other members, including the CFO, controller, treasurer, and other officers to run the company. Management, under the oversight direction of the board of directors, is primarily responsible for all managerial functions, including the development and execution of corporate strategies, safeguarding resources, ensuring effective and efficient operations, promoting reliability of financial reports, and ensuring compliance with all applicable laws, rules, regulations, standards, and best practices to create long-term and sustainable shareholder value.

Management consisting of the CEO and CFO is responsible for managing the company for the best benefit of shareholders and ensuring they receive accurate, complete, and reliable financial information in making investment and voting decisions. The effective discharge of this responsibility requires management to produce reliable, transparent, and accurate financial statements free of material misstatements caused by errors and fraud. Results of a survey show that antifraud policies, procedures, and practices of management should ensure the following: (1) the adoption of a proactive approach in addressing fraud deterrence, prevention, and detection; (2) the design, implementation, and maintenance of sound financial and effective internal control systems; (3) preparation of reliable financial statements free of material misstatements caused by errors and fraud; and (4) design and implementation of effective antifraud policies and procedures.27

Compliance with both the spirit and the requirements of applicable rules, regulations, and laws, including legal, regulatory, and tax and accounting rules, is one of the primary responsibilities of management. The focus of the investing community and the financial markets will continue to be on a public company’s financial performance; however, recently companies’ social responsibility performance has also started to receive attention. Laws, rules, and regulations have recently increased significantly in response to the emerging global competition, which has reshaped financial and capital markets structure worldwide to provide adequate protections for global investors. The globalization of capital markets and the demand for investor protection in response to financial scandals worldwide (e.g., Enron, WorldCom, Parmalat, and Ahold) also require consistency and uniformity in regulatory reforms and corporate governance practices, and thus proper compliance with them.

The global competitive nature of U.S. capital markets is driven by tougher regulatory reforms in protecting investors. According to the Corporate Fraud Task Force’s 2008 Report to the President, the Department of Justice charged 34 defendants during its 4-year investigation of the Enron collapse. Twenty-six of the thirty-four were former Enron employees. The CEO, Jeffrey Skilling, and the CFO, Andrew Fastow, were among those receiving prison sentences. Kenneth Lay, Chairman of the Board, was found guilty but died while awaiting an appeal opportunity. Lea Fastow, wife of Andrew Fastow, was sentenced to 1 year in prison for her role in filing tax returns that did not include some of the ill-gotten gains from her husband’s schemes.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.