Wells Fargo banking scandal a financial crisis we can finally understand | Business. For most Americans the fallout of the 2008 financial crisis was all too obvious. The economy imploded, jobs disappeared, house prices collapsed. But coming to grips with the reason it was happening – the run on mortgage-backed securities, collateralized debt obligations (AKA, CDOs), credit default swaps, synthetic derivatives, tranches – was not so easy. The mumbo jumbo mattered – and that’s what made it all the more infuriating. It was a banking crisis that only the insiders could decode.
Even on the occasions (both then and since) when the bank CEOs have been dragged in front of Congress for what have become almost ritual attempts to humiliate and shame them, most of those efforts have been failures. So let’s be grateful that the banks have finally provided us with a scandal that we can understand, and to the regulators, for (belatedly) addressing a real problem that too many Americans grapple with daily. The Wells Fargo mess is the poster child for it all. The Biggest Stock Scams Of All Time.
It is unfortunate, but words often associated with money and fortune are "cheat," "steal" and "lie. " Who among us hasn't "accidentally" taken two $500 bills from the Monopoly bank, or forgotten at least once to pay $5 back to a friend? Chances are you were never called on it, because your friends trusted you. Just as we trust our friends, we put faith in the investing world. Investing in a stock takes a lot of research, but it also requires us to make a lot of assumptions. For example, we assume reported earnings and revenue figures are correct, and that management is competent and honest, but these assumptions can be disastrous.
Tutorial: Online Investment Scams Understanding how disasters happened in the past, can help investors avoid them in the future. ZZZZ Best Inc., 1986Barry Minkow, the owner of this business, posited that this carpet cleaning company of the 1980s would become the "General Motors of carpet cleaning. " Is there a moral to this story? Can a new form of accounting save animals from extinction? | Guardian Sustainable Business. Over the past few years, businesses have increasingly talked about the need to assign monetary value to forests, wetlands and other ecosystems. The concept has been gaining momentum, and leading companies are already factoring it into their sustainability planning.
Walmart, for example, has worked to examine how threats to the natural world pose risks up and down its supply chain. It has begun advising its suppliers on how to make their products more climate resilient by reducing greenhouse gas emissions, improving water conservation, and preserving biodiversity and ecosystems services to help improve crop yields. But for all this effort, programs to cut water use, waste and carbon footprints have not prevented the continued loss of species. Animal populations have dropped by half since 1970, and between 500 and 36,000 species are lost each year. Putting a price on nature One barrier to action has been the difficulty of accounting for biodiversity and ecosystem services.
Accountancy reform: Shining a light on the auditors. EVERY financial meltdown prompts a hunt for scapegoats. In the wake of the most recent one, calls to reform accounting have grown particularly loud, and action is on the way. In the coming months both America and the European Union are expected to introduce new rules aimed at enhancing auditors’ independence. But for all the heated debate over the changes, any improvement is likely to be modest. America’s bean-counters were effectively self-regulating until 2002. That year, following a wave of accounting scandals, Congress passed the Sarbanes-Oxley act to reform corporate governance. It limited the consulting work firms could do for their audit clients and set up a new regulator, the Public Company Accounting Oversight Board. One aims to make audit reports more useful by requiring a section highlighting “critical audit matters”—the high-stakes judgment calls that keep accountants up at night, such as how the business being audited has valued its intangible assets.
The "Big Four" accountants in Britain: When bean counting pays off. LAST December, the outlook seemed grim for the “Big Four” accountancy firms in Britain. Three out of the four, Ernst & Young, PwC and KPMG, announced they had cut pay for their British equity partners. KPMG was particularly badly hit—announcing job cuts at all pay levels. Neither had Deloitte, the fourth, completely escaped the slowdown in the audit and advisory business. The previous year it was forced to cut partner pay as well.
But this year, business appears to have bounced back slightly. The four behemoths—which offer services to companies ranging from auditing to consultancy—increased their combined British revenues by 4.2% to just under £9 billion ($14 billion). It seems that much of the slowdown in their British businesses was linked to Europe’s wider economic difficulties. Accountants do best when companies are growing and deal volumes are increasing. Accounting scandals: The dozy watchdogs. NO ENDORSEMENT carries more weight than an investment by Warren Buffett. He became the world’s second-richest man by buying safe, reliable businesses and holding them for ever.
So when his company increased its stake in Tesco to 5% in 2012, it sent a strong message that the giant British grocer would rebound from its disastrous attempt to compete in America. But it turned out that even the Oracle of Omaha can fall victim to dodgy accounting. On September 22nd Tesco announced that its profit guidance for the first half of 2014 was £250m ($408m) too high, because it had overstated the rebate income it would receive from suppliers.
Britain’s Serious Fraud Office has begun a criminal investigation into the errors. The company’s fortunes have worsened since then: on December 9th it cut its profit forecast by 30%, partly because its new boss said it would stop “artificially” improving results by reducing service near the end of a quarter. The situation is graver still in emerging markets. What Are the Important Metrics of Business Performance Management? Differences Between A Business Appraiser, CPA Auditor And Due Diligence Expert | BizBen.com. What are the differences between a business appraiser, CPA auditor, and a due diligence expert? It has been said that you cannot judge a man until you have walked a mile in his shoes. Over the years I have trod the business path--for much more than a mile--in the role (if not in the footwear) of business appraiser, CPA and due diligence expert. And since setting up Due Diligence Assistance for buyers, I have gained a new respect for what knowledgeable CPAs have to go through when assisting their buyer clients in investigating a business.
With very limited information they must determine if the books are "cooked" (containing false and incomplete information) and if so, by how much. The CPA may find him or herself in the most awkward position of being informed--usually by the seller--that the business books are not completely accurate because they understate the company's earnings--a fabrication intended to reduce the seller's tax liability. Banking crisis guided tours of New York | Business. Dwarfed by the Corinthian columns of the New York Stock Exchange's towering facade, Wall Street tour guide Tom Comerford opens a weather-beaten folder on a busy street in the heart of the Big Apple's financial district.
"I'm going to show you a toxic asset," he tells a small group of curious tourists. "You can even touch it. " Comerford, a graphics employee at Goldman Sachs who leads guided walks in his spare time, gets out the front page of an inch-thick legal document that comprised a $1.5bn collateralised debt obligation, issued in 2006. The derivative, granted a triple-A rating for its top tranches by credit agencies, went spectacularly sour, with investors losing 80 cents in every dollar. As financial turbulence grinds on and the global economy stutters towards a half-hearted recovery, a cottage industry has sprung up in "credit crunch tourism". In an alleyway outside AIG, Comerford pauses to explain the size of the insurance company's taxpayer-funded bail-out. Britain is still a world-beater in one industry – tax avoidance | Larry Elliott | Business.
There are few sectors of business these days in which Britain can claim to be a world leader, but tax planning is one of them. When it comes to finding ways for corporations and high net worth individuals to minimise their bills to HM Revenue & Customs, the UK is up there with the very best. The Commons public accounts committee is not happy about the £5bn the tax avoidance industry is costing the exchequer each year and the backbench MPs appear to have the backing of the prime minister and chancellor, both of whom have promised action in recent days. So what could be done? One suggestion by MPs on the committee is that tax avoiders should be "named and shamed". That has a nice populist ring to it, and might deter the likes of comedian Jimmy Carr from exploiting loopholes, but would probably be far less effective in changing the behaviour of the big multinational corporations.
Margaret Hodge: tax avoidance costs the Treasury £5bn a year | Business. The exchequer loses at least £5bn a year because the taxman is failing to crack down on "morally wrong" tax avoidance schemes similar to the one used by comedian Jimmy Carr, the chair of the Commons public accounts committee warns today. Margaret Hodge, the former Labour minister, said rich businessmen designing the schemes were "running rings" around HMRC. She said HMRC had an "appallingly bad record" at catching tax cheats, having fined just 11 people for promoting tax avoidance since 2004 – despite 10,000 people a year coming forward to report tax avoidance schemes. A report by the PAC published on Tuesday says there is "a lot of money to be made in selling avoidance schemes", and commissions paid to the creators of the schemes can be up to 20% of the tax saved. Hodge told Lin Homer, chief executive and permanent secretary of HMRC, that she didn't want to be "aggressive and awful about it", but the agency's failure to crack down on tax avoidance was "gobsmacking".
Big Four accountancy firms 'too close to company bosses' | Business. The bosses of Britain's largest companies are too close to the "Big Four" accountancy firms which carry out the overwhelming majority of audits, a report is expected to say on Friday. The Competition Commission's review into how KPMG, PwC, Ernst & Young and Deloitte audit 90% of UK-listed blue chip businesses is expected to say that while it found no evidence of collusion between them, there is a restricted amount of competition.
It is expected to attack the cosy relationship between auditors and senior management at City firms, who are often alumni of the Big Four themselves. High-ranking members of Big Four firms also sit on many company boards. It will reportedly not seek the break up of these firms – which also provide a wide range of non-audit services to their clients – but suggest measures to reduce their stranglehold over the UK's largest firms, including a ban on "Big Four-only" clauses in loan documents from banks and giving shareholders a greater say in the choice of auditors. Ten top American fraudsters. BMAC: Tesco and the true cost of losing a good name. By Simon Cole and Sandra Macleod Monday, 01 December 2014 Credit: Pavel P/Flickr What's a reputation worth?
It's a question that every board in the country would love to have an answer to, and it's one that a closer look at the cumulative results of Britain's Most Admired Companies can help shed some much-needed light on. Take the corporate morality tale that is Tesco. See the full list of Britain's Most Admired Companies here But since then, things have gone badly wrong: the horse-meat scandal, profit warnings, that £263m black hole and now an SFO investigation. By applying regression analysis techniques to the kind of metrics consumed by institutional investors - financial results, consensus forecasts and the results of surveys including Most Admired - Reputation Dividend calculates the contributions of a company's reputation to its total market capitalisation, and the component parts of that reputation.
So the evidence is clear. Unhappy Christmas for Dave Lewis as Tesco accounts face scrutiny from Financial Reporting Council. By Rachel SavageMonday, 22 December 2014 If Tesco boss Dave Lewis thought he would be able to end the year focusing on that all-important task of selling people their Christmas dinner then he was mistaken, as Britain’s largest supermarket faces the prospect of yet another uncomfortable light being shone on its accounts. The Financial Reporting Council, the UK’s independent accounting watchdog, has announced an investigation into the ‘preparation, approval and audit’ of Tesco’s financial statements, the latter by PwC, stretching back to the fiscal year ending in February 2012. It’s not good news for PwC, but it’s certainly not the early Christmas present Tesco needed either, as the FRC has the power to fine, demand costs and strike off individuals who are members of any accountacy professional body - which could include current or former Tesco finance staff if the FRC does find any wrongdoing.
General accounting course. See also our elementary I Introduction II Example of a small firm III From single-entry to double-entry accounting IV A complete accounting cycle up to the Trial balance V Adjustments to the Trial balance VI The Income Statement and the Balance Sheet VII General principles of accounting and miscellaneous topics VIII Money IX Accounting over several years X A deeper look at the Balance Sheet XI Cash flow statement XII Ratios. What is a firm?
Main concepts of accounting. Untangling the Madoff Case. Societe Generale trader Kerviel jailed for three years. 5 October 2010Last updated at 11:53 The BBC's Christian Fraser expects the bosses at Societe Generale will be pleased with the outcome Former Societe Generale trader Jerome Kerviel is facing three years in jail after being convicted by a Paris court.
Kerviel was told he must also repay the damages of 4.9bn euros ($7bn; £4bn) which the bank said it lost through his risky trades. He was found guilty of forgery, unauthorised computer use and breach of trust. Kerviel's lawyer said they would appeal against the conviction. The total sentence given was five years in prison, with two years suspended 'Disgusted' The trial earlier this year was over charges that he bet 50bn euros of SocGen's money without the bank's knowledge. Continue reading the main story Analysis Hugh Schofield BBC News, Paris Obviously the $4.9bn repayment is a totally theoretical amount because there's no way Mr Kerviel will be able to pay it. Profile: Jerome Kerviel 'Catastrophe' Continue reading the main story 'Timing' Cuomo Brings Suit Against Ernst & Young. Tim Harford: Whistleblowers can identify crises.