Posted by & filed under Fraud Accounting, Uncategorized.

A KPMG Canada survey report:

 KPMG’s Forensic division of Advisory Services, prepared a report that surveyed executives of Canada’s largest companies on the topic of people who had defrauded their company.

The report explores who commits fraud, how the fraud is carried out, and what factors lead someone to commit fraud.

KPMG Forensic recently published Profile of a Canadian Fraudster: To read more see the following link: Profile of a Canadian Fraudster

 Based on a survey of executives from Canada’s largest companies. Designed for business leaders, it provides insight into situations where fraud may have occurred and builds a profile of those most likely to engage in such activity.

A few key findings from the report include:

  • Almost three-quarters of frauds were carried out by men
  • Most fraudsters (69 percent) were between the ages of 30 and 49
  • Fraudsters were employed most often in operations (45 percent), accounting (14 percent), and procurement (7 percent) groups within their companies
  • The three main factors reported as leading to fraud were personal need (28 percent), opportunity (19 percent), and greed (14 percent

 What can be done to protect and detect it?

 As a result of Sarbanes-Oxley and Bill C 198 legislation, introduced both in the USA and Canada, companies are looking at Entity-Level-Controls to help prevent and detect fraud.

The Entity Level Controls that have a major impact in the detection and prevention of fraud:

1. An Effective Whistleblower hotline

2. A robust and properly implemented code of business conduct

3. A consistently applied and thorough system to pre-screen new hires.

Discussion Questions:

1.Do you agree with an effective policy of screening applicants before hire, in order to reduce fraud?

2. How effective is a business code of conduct in preventing fraud?

3.  Discuss which factors you believe lead to fraud , Personal need, opportunity or greed?

Information taken from KPMG website: You may download the complete report.

 

 

 

 

 

 

 

 

Posted by & filed under Auditing, Fraud Accounting, Uncategorized.

The first witness in the fraud trial of three former Nortel Networks executives says external auditors were “uncomfortable” with some of the company’s accounting practices.

 The witness, Brian Harrison, Nortel’s former director of financial planning and analysis, says he had “very little” contact with auditors in his role.But Harrison says that in one rare meeting he had with auditors Deloitte and Touche, the firm challenged why Nortel would release some so-called excess accruals but not others.

 Prosecutors contend that under the direction of former CEO Frank Dunn, employees were encouraged to use reserves of accruals from previous quarters to give the illusion the company had returned to profitability.

 Accrual based accounting: Records the effect of economic or business transactions as they occur, no matter when the cash is received or payment is made.

 The Crown alleges Nortel’s senior management released just enough onto their balance sheet to return the company to profitability and trigger millions of dollars of bonuses for senior management.

 Defence lawyers argue that the auditors continually reviewed and approved Nortel’s books.

 Discussion Questions:

  1. Distinguish Accrual based accounting from Cash based accounting?
  2. Do you think that Bonuses or Stock Options may have had any influence to manipulate financial information?
  3. Discuss with the class or fellow students and your teacher, some of the ways financial statements may be manipulated to increase profit?

To read more : Go to cbc.ca/news

 

 

Posted by & filed under Financial Accounting, IFRS, Uncategorized.

What, if any, are the potential economic consequences or benefits of the Canadian IFRS adoption?

As the activities of preparing and auditing the first set of complete annual reports using international financial reporting standards (IFRS) are in full swing, it is easy to identify some costs of transitioning from Canadian GAAP to IFRS. So it is an appropriate time to ask, why are we going through this transition? Are there benefits that my company, my clients or the country as a whole might expect to realize from IFRS adoption?
Recent academic literature has examined IFRS transitions, mainly the European Union (EU) transition, which occurred in 2005, and provides evidence that some benefits have accrued to some IFRS-adopting firms.

Benefits are summarized below:

 1. IFRS adoption may increase transparency if IFRS-compliant financial statements better reflect a firm’s economic context and contain enhanced disclosures.

2. Increased international comparability may result as about 90 countries have fully conformed with IFRS.

3.  Lower costs of capital, increased liquidity, and enhanced analyst and investor participation, particularly among foreign analysts and investors.

4. There is a general expectation that these capital market benefits will result in macroeconomic benefits such as increased employment.

5. Finally, an emerging literature examines how IFRS affects the usefulness of accounting numbers in settings other than capital markets, particularly in contractual settings such as executive performance appraisal and remuneration.

 Why might we see these capital market effects from IFRS adoption?

It is difficult for researchers to provide direct evidence to answer this question. However, additional studies that examine the effects of IFRS financial statements on capital market participants’ decisions provide some insights. Byard et al. (2011) find that both financial analysts’ earnings forecast errors and the dispersion of earnings forecasts across analysts decline after IFRS adoption.

Foreign analysts are also able to forecast IFRS-based earnings more accurately than they could forecast the prior local GAAP earnings for adopting firms.

IFRS adoption also attracts local analyst following but does not improve local analysts’ forecast accuracy. Since earlier research suggested that local analysts could forecast more accurately than foreign analysts under local GAAP reporting, this suggests that IFRS adoption reduces or eliminates the forecasting advantage that local analysts previously enjoyed.

Conclusions and implications for Canada
The evidence to date appears to suggest that at least some IFRS-adopting firms have experienced lower cost of capital; enhanced equity market liquidity; and increased analyst and institutional investor interest, particularly among foreign analysts and investors. 

Discussion Questions:

1.Will Canadian IFRS adopters, expect to receive similar benefits?

2. Are these benefits easily quantifiable?

3. Is it too early to tell whether IFRS adoption has been beneficial to Canada?

Article written by: David Godsell and Michael Welker

Read the complete article in CA magazine :Inconclusive Evidence

Posted by & filed under Financial Accounting, Managerial Accounting.

Inventory Write-Down:

Research In Motion Ltd. will write off much of its PlayBook inventory and book a $360-million after-tax charge due to poor sales and discounting of the tablet, a move that will impact the BlackBerry maker’s financial targets.

 

 

 

 

 

 

“RIM is committed to the BlackBerry PlayBook and believes the tablet market is still in its infancy,” Lazaridis said.

The impact of poor PlayBook sales will cause RIM to miss its full-year forecast of earnings per share between $5.25 and $6, RIM said, as costs rise.

Third-quarter adjusted earnings per share are expected to come in “at the low to mid point” of $1.20 to $1.40.

RIM shares fell $1.73, or more than nine per cent, to $17.08 on the Toronto Stock Exchange.

Sales of the PlayBook haven’t been able to make a dent in the competition from Apple’s iPad or Android-based tablets.

To read more on RIM visit CBC News.

Discussion Questions:

1. Why do you think RIM sales for their playbook has declined?

2. Which product have consumers embraced?

3. The write down in inventory, will create a loss in the current year end: Is a write-down in inventory the correct thing to do?

 

 

 

 

 

Posted by & filed under Financial Accounting, Managerial Accounting.

Urgency to Reduce Debt:

Finance Minister Jim Flaherty urged European leaders to find a solution to their debt crisis quickly, or risk further harm to the global economy.

“This dire and pressing problem threatens not only Europe itself, but all countries,” Flaherty told a business audience at a luncheon for the Canadian Club in Toronto. “Ongoing uncertainty stemming from the European sovereign and banking crisis is leading to broader contagion outside Europe and global credit markets.”

European nations are currently grappling with a sovereign debt crisis that is threatening the euro and European Union itself. Several nations have already received bailout funds from the International Monetary Fund and other bodies, but larger and larger economies are moving to the centre of the crisis —increasing the impact on the global economy.

‘Households don’t operate like this and neither should countries.’—Finance Minister Jim Flaherty

Canadian government officials have urged the continent’s policymakers to tackle their growing debt loads with concrete solutions for months, a message the finance minister continued on Friday.

At the same time, Canadian and US consumers are getting a different message:

How much crazier can Black Friday get?

As reports of shopping-related violence rolled in this week from Los Angeles to New York, experts say a volatile mix of desperate retailers and cutthroat marketing has hyped the traditional post-Thanksgiving sales to increasingly frenzied levels in the U.S.

Several incidents marred Friday’s sale — including smash-and-grab looting, pepper-spraying of customers, and bloody scenes in the shopping aisles. Analysts say several forces are at play.

With stores opening earlier, bargain-obsessed shoppers often are sleep-deprived and short-tempered. Arriving in darkness, they also find themselves vulnerable to savvy parking-lot muggers.

“These are people who should know better and have enough stuff already. What’s going to be next year, everybody getting Tasered?”—Theresa Williams, marketing professor at Indiana University

Add in the online-coupon phenomenon, which feeds the psychological hunger for finding impossible bargains, and you’ve got a recipe for trouble, said Theresa Williams, a marketing professor at Indiana University.

Are we confused?

At one end of the spectrum governments tell us to refrain from spending on the other end big corporations launch advertising campaigns enticing consumers and households to spend.

Watch the movie: Century of Self

Read the complete article from CBC news: Finance Minister Jim Flaherty

Read the complete article from CBC news: How much crazier can Black Friday get?

 Discussion Questions:

 1. Do we have a spending problem in Canada, just like the USA and Europe?

2. Do you think we are able to sustain our  World resources by consuming more and spending more?

3. What would happen to our economy the day we decide to stop frenzied spending? (ie. purchasing items that we only need vs what we desire).

 Both articles from the CBC news website.

 

Posted by & filed under Fraud Accounting.

 In 2008, two men, one American, one Canadian, catapulted investment fraud into headlines around the world.

The Canadian was 67-year-old Earl Jones, a Montreal native who bilked 158 investors, including his cancer-stricken brother, his own daughter and other family members, out of $50 million. Like Madoff, Jones had managed to get away with his Ponzi-type schemes for a long period of time, about 30 years in his case. In 2010 Jones was sentenced to 11 years in jail, which in Canada means he could be released after serving only one-sixth of his sentence, depending on his behaviour behind bars. Madoff, on the other hand, will almost certainly die in prison.

 

Too good to be true

Although it’s impossible to prevent all potential victims from being scammed, there are many telltale signs an investment opportunity might not be legitimate. If advisers are aware of what to look for, they should be able to help clients avoid losing money unnecessarily.

1. Large-scale investment frauds typically promise investors un-realistic returns
2. Most investment fraudsters are male and have the gift of the gab

3.  When a potential investor shows an interest con artists first feign reluctance to share his good fortune but gradually relents.

4. Fraudsters announce that  the deal is happening faster than scheduled

 

RED Flags

1. Although the con man had cards and letterhead for an office in a downtown high rise, it was no more than a mail drop-off box. Who would invest large sums of money with someone who only held meetings at a greasy spoon?

2. He had a website that glowed with his accomplishments and recommendations from previous investors. But apart from the website there was nothing about him in the main Internet search engines. That was a result, he explained, of his penchant for privacy and his policy of offering opportunities only to small and exclusive groups.

3.The other major red flag was the ticking clock. Like many a movie plot, a con man’s story includes an impending deadline. Any time an investor is told it’s now or never — leaving no time for effective due diligence — the investor should immediately step away from the deal.

Be Careful

Doing business with a seemingly respected broker does not guarantee that investment fraud won’t occur. There are too many cases of brokers misusing clients’ money to dispel that notion.

Alwasys be careful not to sign any papers sent by the broker without obtaining professional advice on what the papers state.

These days a lot of the smaller investment frauds are launched via the Internet. Although many people — hopefully most — are aware of the variations in the so-called Nigerian scams that offer large amounts of money to help someone access a small fortune in some foreign bank, they do occasionally work.

To read the complete article visit: David Malamed, CA·IFA, CPA, CFF, CFE, CFI, is a partner in forensic accounting at Grant Thornton LLP in Toronto. He is also CAmagazine’s technical editor for Fraud

 

 Discussion Questions:

1. Do you know of any scams or of anyone personally close to you that has been scammed?

2. What are some of the Red Flags that may demonstrate a potential scam?

3. Has the internet reduced or increased the potential for fraudsters to prosper in the investment industry?

Posted by & filed under All Articles, Uncategorized.

Quebec students proved they are serious about fighting tuition fee increases as thousands  skipped classes and marched through the streets of downtown Montreal on Thursday to demonstrate their opposition.

For Martine Desjardins, president of the Federation Etudiante Universitaire du Quebec, the boycott was a success — both because of the number of students who rallied and because it all went peacefully. Police put the crowd, unofficially, at about 15,000;  “I asked for calm because I didn’t want any violence to interfere with the message,” Desjardins said after the march had disbanded.

The message, she said, is that students aren’t alone — that the fight against tuition fee hikes has become a societal issue.

 

To read more: See the Gazette article by,By Karen Seidman, Gazette universities reporter

 

London England:

Some 10,000 people from across Britain were expected to join the demonstration against the education policies of the coalition government. It was the biggest protest in London since the capital and other English cities suffered four days of rioting in August, the worst urban violence for decades. The students are angry at the government’s education plans which they argue amount to privatisation of the system, and last year’s decision to hike university tuition fees and cut attendance payments for poorer teenagers

 Discussin Questions:

1. Will  the increase education costs affect your decision to attend University?

2. Should University be accessible to all at no cost?

3. What do you think will happen if University Education is available to all , will the quality of education increase or decrease? discuss.

 

Posted by & filed under Financial Statement Analysis.

What is an IPO?

An initial public offering, or IPO, is the first sale of a corporation’s common shares to investors on a public stock exchange. The main purpose of an IPO is to raise capital for the corporation. While IPOs are effective at raising capital, being listed on a stock exchange comes with heavy regulatory compliance and reporting requirements.

The term IPO only refers to the first public issuance of a company’s shares. It assumes a company is big enough, successful enough, and has the required track record to raise capital in the public equity market. If a company later sells newly issued shares again to the market, it is called a seasoned equity offering. When a shareholder sells shares, it is called a secondary offering and the shareholder, not the company that originally issued the shares, retains the proceeds of the offering. These terms are often confused and only a company which issues shares can make a primary offering or IPO. Secondary offerings occur on the secondary market, where shareholders (not the issuing company) buy and sell shares from and to each other.

Shares in Groupon Inc., a pioneer of the online coupon business, jumped by more than a third in their first day of trading on the Nasdaq stock exchange.

 A little before markets closed, the shares were trading at $27.19, well above the $20 their initial public offering was priced at Thursday evening. That’s a gain of about one-third. The stock had earlier been as high as $29.52, a gain of almost 50 per cent on the day.

 Early estimates of the stock’s IPO pricing had been as high as $25 a share, before being scaled back to as low as $16 to $18 in recent weeks as stock markets cooled. The IPO only sold 5.5 per cent of Groupon’s shares, which means the market is currently valuing the company as a whole at more than $17 billion US.

 The Chicago-based company is the market leader in the fast-growing group-buying business. The company partners with local companies to offer drastic discounts via the form of coupons, emailed to their millions of email subscribers.

 Though it’s spawned many copycats after its 2008 launch, Groupon has the advantage of being first. This has meant brand recognition and investor demand, as evidenced by its sizzling public debut.

 Although the company has tens of millions of subscribers, filings with securities regulators reveal that it is not yet profitable.

 

Discussion Questions:

1. Do your own research on IPO’s, why is there such a demand?

2. Due to the tens of millions of customers , do you think Groupon will continue to grow ?

3. Why are shareholders willing to purchase and own shares in a company that has not made any profits?

Visit the Groupon Website

Read more on CBC news:click link

Read Bloomberg News, click link

Posted by & filed under Fraud Accounting.

Budget cuts and reorganizations raise the pressure for individuals to meet performance targets the risk of fraud increases.

 Steps firms can take to help curtail corporate fraud:

1.     Know who you hire. Contact references and verify the education of potential hires. Conduct criminal and financial background checks on those being considered for financially sensitive positions.

 2.     Take away temptation. Perform regular ethical and social hacking to ensure Internet access and systems controls are secure.

 3.     Keep staff informed. Annual organization-wide ethics training delivers a consistent message. A strong ethical environment encourages self-policing.

 4.     Establish detection mechanisms. A combination of internal audits, surprise audits and senior management reviews will ensure the right questions are being asked at every level. This over-sight should extend to remote locations.

 Implement checks and balances. While most fraud occurs in non-management ranks, fraud by executives is often more costly. Create an advisory committee to provide oversight at all levels.

 Set up an anonymous hotline to report fraud. When a call comes in, act quickly to confirm its validity.

 Take action. If fraud is detected, implement a rapid-response plan for investigating, reporting and prosecuting misconduct, fraud or corruption. Follow-up procedures ensure questionable behaviour is not overlooked. Then put controls in place to prevent this type of fraud from happening again.

 Discussion Questions:

  1. Why is fraud more prevalent in poor economic times?
  2. Know who you hire; why is this preventive control so important?
  3. Do you feel that applying all the above controls, will prevent fraud?

To read more: visit the October issue of  CA magagine


Written by: Jonathan Marks partner who leads the fraud and ethics group at US accounting and consulting firm Crowe Horwath (www.crowehorwath.com)

 

Posted by & filed under Accounting Careers, Corporate Restructuring, Financial Accounting, Taxation & Planning.

To Some!

CAs are dull and colourless, but to SMEs (Small Medium Enterprises), they are trusted advisers, valuable sources of information and providers of many services

 Not True!

Bland, boring and colourless are just a few of the common stereotypes that spring to mind when describing an accountant. But these are just urban myths. In the small and medium enterprise (SME) world, the accountant holds the status of a hero, one who fights for entrepreneurs against the multiheaded monsters of fiscality, government regulation and foreign competition.

 While not an exhaustive list, here are at least a few such services.

 Preparation of Financial Statements:

Basic preparation of financial reports can involve a lot of added value. “There’s a lot of value simply in giving a SME the exact report it needs,” Lavigne says. “For example, an obvious question is: should it have reports in line with the new IFRS rules or with Canadian GAAP? What level of credibility do you need to give them: a basic “Notice to Readers, a “Review Engagement” or an “ Audit Report”?

Just sorting out the regulatory constraints that underpin those choice implies a refined level of knowledge on the accountant’s part

 Helping Startup Companies:

There are levels where accounting goes beyond report preparation and reaches the heights of strategy — if not art. This is what Pierre Bélanger, president of Dagua Inc., witnessed while working with an external accounting firm. A startup firm, Dagua has attracted major investment partners with its groundbreaking self-contained water filtering station, which uses ozone rather than chemicals to make contaminated water drinkable.

With a few simple manoeuvres, the accountant changed the company’s financial position. Dagua was spending a lot of money promoting its product before it was ready to come off the production line. “We were showing heavy losses,” says Bélanger.

A seasoned businessman, Bélanger did not see how he could present more favourable statements. The accountant took advantage of special laws applying to startups to capitalize marketing expenses that were going to show results in only three or four years. “We transferred more than $2 million in expenses and showed results that were much better aligned with our company’s position in a startup’s life cycle,” Bélanger says.

 Corporate Restructuring:

Diagnocure, a well-established biotechnology company in Quebec City, benefited from the fiscal expertise of a large accounting firm. “During the corporate restructuring, it made a difference,” says financial manager Frédéric Boivin. When Diagnocure bought a firm in the US and opened a US subsidiary to market its new diagnostic test, it faced conflicting scenarios. For example, it could incorporate the companies in the US, create limited partnerships, make one company dependent on the other, or liquidate both and control everything from Canada.

“We ended up forming a limited partnership for the company we bought out and set up a general partnership with the one we created. When the general partnership will have fulfilled its objective, it will absorb the limited one and, as profit shows up, it will be transferred to the parent company in Canada to help it cover its losses.”

 Cash Flow Forecasting:

Dagua found its accountant’s high value area was financial forecasting. “His expertise proved essential,” Bélanger says. “Sure, management knew what the money inflows and outflows were in a few areas, but those represent maybe 10 out of 60 lines in a spreadsheet. We were at a loss concerning the way to account for cash flows around real estate, purchases, diverse depreciations and sales tax inputs. Our accountant knew.”

 Succession Planning:

Accountants are uniquely qualified to address many issues in family successions, says Robinson, whose firm specializes in such succession issues as estate freezes, valuing the business and transferring shares. But the real value accountants can bring is in the soft skills of dealing with people, emotions and egos.

 The full value an accountant can bring to SMEs is even greater. In fact, the whole is so colossal, you may wonder how accountants remain so unassuming.

 Discussion Questions:

  1. Does the article give you a sense that the Accountant is more than an Accountant?
  2. What do you understand from Succession Planning? Ask your teacher, for more details.
  3. How important is Cash Flow Forecasting for a company?

 This article was edited from the CA Magagine, authored by Yan Barcelo, to read all the Ten Ways that an accountant provides value to SMEs visit the camagazine link.