Jazzercise, a physical fitness company, have filed a case against their former finance director, Sherri O. Potts, who was stealing from the company. Sherri is charged with 50 theft related charges including forgery, fraudulent appropriation and grand theft by an employee. If convicted she could spend over 40 years behind bars.
Over the decade of her employment, Sherri embezzled over $1 million from her employer. She would siphon off funds from the petty cash account. She would ask that $13,000 be delivered every month for petty cash, when the actual petty cash usage for the company per month was around $2,000. The amount left after actual payments would be pocketed by her. She would destroy the receipts, manipulate the accounting software and delete records that would track petty cash. She also forged checks (48 per the investigation) from the personal accounts of the owners of the company to pay herself. The forged checks were for over $150,000.
She used the cash to pay her personal bills, travel, shop and above all gamble. She gambled more than $900,000 a year in slots from 2008- 2013!! Must be exercising her arms on the slots!
With Brexit, the question now is whether the British lawmakers would ask the British companies to file their financials using a different set of accounting rules than the current International Financial Reporting Standards. Some British politicians and investors have been heard saying that the IFRS has compounded the financial crisis and that these rules lack rigor.
I wouldn’t say that IFRS lacks rigor, as IFRS is more principle based it could lead to different interpretations for similar transactions which might lead to different accounting presentations by different companies. IFRS doesn’t necessarily define everything in the standard, it lets accountants use their judgment.But it doesn’t lack rigor, it is more open to interpretation and judgment.
If the listed companies in Britain do not use IFRS, then there are multiple issues. One being what would the new standards be, then implementing those standards and recreating the financials. As with change of standards, one would have to show prior period numbers under the new standards as well. It would be an accountant’s biggest nightmare. Considering that year end is nearing, this should be resolved quickly and in favor of status quo.
The other thing to consider is, if Britain moves away from IFRS, then the International Accounting Standards Board which is the standard setting board and is the one that issues IFRS will have to move from its current headquarter location in London to another country in the European Union. If Britain stops using IFRS, it puts a big question mark on the future of the standard itself. Also considering that for the past few years both FASB (Financial Accounting Standards Board- the board that works on US Generally Accepted Accounting Principles) and IASB have been working on the convergance project, it puts a question mark on the future of the project as well.
FMC Technologies Inc and two of its former Controllers settled charges with the SEC, that it overstated profits in one of its business segments. The reason for the overstatement- to meet internal targets, the method of overstatement- improper adjustments and adjustments outside of an accounting period.
Two of the company’s controllers first improperly reduced the company’s liability associated with employee paid time off leading to overstatement of operating profit by $800K. They also corrected an error worth $730K recorded in 2012, in Q1 2013 without notifying the top controller. Do note that they later also signed a letter in which they said that we did not book any out of period adjustments over $250K! Apart from these entries, the company also made an out of period adjustment of $8 million for interest income in 2014.
The penalty for the company- the company will pay $2.5 million to the SEC, the two execs will pay $30K and $10K respectively and will be suspended from working on SEC related accounting matters (though they can apply for restatement after 2 years). Question is should they be allowed to?
Roger Stadtmueller, a CPA who owns Stadtmueller & Associates, an accounting and consulting services firm in Spokane Washington was charged and sentenced to 15 months of prison for filing fraudulent tax returns for his own company. Stadtmueller had set up a corporate entity Zazz, Inc. under which his CPA practice Stadtmueller & Associates conducted business. Stadtmueller understated the gross receipts for Zazz by around $1.8Million in the 2006 to 2008 tax returns that he prepared and filed with the IRS.
Filing fraudulent tax returns for others is one thing, but filing your own tax returns fraudulently, you would think a CPA would know that is a definite no! Isn’t that ethics 101!!
Lime Energy Co. agreed to pay $1 million to settle accounting fraud charges filed by the Securities and Exchange Commission. SEC alleged that Lime Energy and four of its executives recognized millions of dollars of revenue improperly.
In total $20million of revenue was accounted for incorrectly from 2010 to 2012. In 2010, two of the company’s executives developed procedures where the revenue could be recognized as part of that year, on newly signed contract before the documentation was received. But even when the documentation didn’t arrive, they went ahead and booked the revenue. The two executives became even more aggressive in the next few years. They would directly go to the Controller with new entries for revenue and inflate the numbers to meet their internal goals.
None of the executives either admitted or denied the allegations, but all agreed to pay a penalty and are barred to serve as director/officer of a public company for the next few years.