We have tried to explain three famous fraud cases that have affected the whole globe. Each of these cases has their own characteristics and their management style was different than the others. In order to give a brief explanation about these three cases we have conducted the following table which will give the summary of what has happened, who has participated, etc.
· Electronic components, health care, fire safety, security, and fluid control
· Inflated their financial statements
· Borrowing money from partnerships which are not real, so put the borrowing money to the subsidiaries, not loans
· CEO accused of stealing money from the company
· Tyco’s CEO, CFO, and CLO received USD 170 million in loans without informing the shareholders
· CEO spend more than USD 135 million under unpaid debt, charity expense and company expenditure for real estate
· CEO transferred funds to his own account.
· A scanning machine was used to forge certain Bank of America documents, which were then sent to auditors who certified the Bonlat unit’s accounts. The prosecutors have already named roughly twenty people in a probe that began in mid-December 2003.
· There is a cash crisis
· There is no cash crisis
· There is not a cash crisis but lack of cash
· Arthur Andersen
· Grant Thornton
· Deloitte, after 1999.
Audit company’s fault
· Not paying attention to the inflated financial reports
· Shredding documents related to Enron
· Missing hundreds of millions of dollars in unreported, misappropriated and misrepresented compensation shared among Tyco high level of management.
· Grant Thornton and Deloitte’s auditors had not checked if the cash balance in Bank of America is true or not.
· They based on the letters that were fraudulently intercepted and altered, allowing the deception to continue.
What happened to audit company?
· Its licenses and right to practice were surrendered
· This effectively ended the company's operations.
· PricewaterhouseCoopers paid the SEC USD 5 million to settle alleged violations of auditor independence from 1996 to 2001
How to prevent?
· If the auditor company had been audited carefully by a superior council or by any supreme regulation board,
· If the legal regulations that are used in the relations of auditor and the client had been previously stated well,
· If the banks had used their expertise units for determining the operational scope of the company,
· If the auditor company had previously informed and forced Enron about not transferring the debts to other subsidiaries,
· If the auditor company had understood that it might affect their reputability in the whole globe,
· If the rating agencies and the regulatory institutions had previously analyzed Enron case by making consolidated reports including the subsidiaries,
· If the regulation centers had put rules about the former CEO or responsible people of Auditor companies to work on the companies which are audited by the same corporation,
· If not only an auditor company but also a different governmental organization had participated in the audit,
This big fuss would have never happened
· The auditor must be changed with a new one regularly in a certain predefined period of time.
· The former auditor must be very careful and must pay attention to the international standards and fraudulent transactions since the new auditor may find their mistakes and their reputation will decrease accordingly.
· If this accounting firm had reported these suspicious transactions to higher councils the magnitude of the burden would have never been like this.