Wednesday, November 30, 2005

Most corporate fraud found by luck: study - Yahoo! News

Most corporate fraud found by luck: study - Yahoo! News: "Despite tough regulations aimed at improving corporate governance, financial fraud is still on the rise around the world, and most is still detected by chance, a study from auditing firm PriceWaterhouseCoopers (PWC) showed on Tuesday"

"For the roughly one-third which said they could quantify the cost of the fraud, the total losses exceeded $2 billion, or an average of $1.7 million per company.

"Economic crime remains difficult to detect, despite everybody's best efforts to invest in internal controls," said Steven Skalak, Global Investigations Leader at PWC.

The survey showed that the most common methods of finding out about financial fraud were still accidental, like calls to hotlines or tips from whistle-blower employees."

Why am I not surprised? Because if people want to hide their dishonesty, it is often easy to do. In class I occassionally use the Adelphia case where I hand out the footnotes that let to the Rigas' downfall.

Knowing that there was a problem, most people (myself included)could not tell for sure which footnote was the "smoking gun."


Anonymous said...

do you find the notes section of an annual report to be the most important part of the annual statement. since numbers without background information to how they arrived at those numbers are basically meaningless...i would argue that the notes section is indeed the most important...especially for determining fraudulent behavior.

Anonymous said...


A Family Friend who works for Lucent told us about a year after WorldCom collapsed that they could never understand how WorldCom made that kind of money.

Now they know


thewailer said...

prof jim...I am a fan of your blog! :D

Anonymous said...

Blog for and by a PhD Finance student. Also useful for PhD applicants.