Illegal Corporate Activities and Their Effect on Financial Statement Disclosures and How Forensic Accountants Can Help

In this exploratory study, “Illegal Corporate Activities and Their Effect on Financial Statement Disclosures and How Forensic Accountants Can Help”, we intend on analyzing Security and Exchange Commissions (S.E.C.) enforcement actions and their effect on corporations’ disclosures. Auditing standards set forth by the Public Company Accounting Oversight Board (PCAOB), AICPA auditing standards and PCAOB advisement alerts will be examined to see how they prescribed financial statement disclosure of these illegal acts to be presented.  Auditing standards and PCAOB alerts will be compared with Forensic accounting techniques that might improve the quality of financial statement transparency.

Over the past several weeks I have been able to really see the research fall into place and align it self with our overall goal.  Professor Ulinski and I have met several times and have had great communication regarding our approach to the upcoming steps of the assignment.  At first a big challenge was being able to find whether the company, that was under investigation, had disclosed of the fraudulent activities in their annual reports.

I met with Sarah Burns Feyl, Assistant University Librarian for Instruction Services, and she introduced me to many different databases and tools that enabled me to effectively search for pertinent materials.  With the help of Sarah I was able to more effectively research and collect data to support our study.  The databases that I found the most useful were ABI-Inform, Accounting & Tax Database, Business Source Premier, and the Securities and Exchange Commission Database.  The Security and Exchange Commission Database was the main database that I used; I conducted by searching for companies that the S.E.C had alleged violated the Foreign Corrupt Practices Act.  I found corruption that ranged from bribes, an act of giving money or gifts that alter behavior of the recipient, to kickbacks, is a form of negotiated bribery in which a commission is paid to the bribe-taker as a quid pro quo for services rendered.  The data interestingly showed many similarities between companies that are committing these frauds and where the fraud is being committed.  Although most of the companies that were found are U.S. based or are publicly traded on the New York Stock Exchange most of the fraudulent activity occurred over seas in foreign countries and involved bribery.  These companies did have some sort of disclosure in their financial statement; some were more specific than others (including monetary values and issue that was settled).

Once Professor Ulinski and I had an adequate amount of information we were able to put the paper together where I played an intricate role with editing and formatting the paper.  Overall I have really enjoyed this research project and would highly recommend that others learn about the different databases and if they have the opportunity to do a research assignment with a professor.

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