Accounting Scandal Research Paper Example | Topics and Well Written Essays - 750 words

Accounting Scandal - Research Paper Example Olympus took advantage of the absence of the accounting rules for marking to market. There were unrealized losses related to investment values. Olympus paid high amounts in the form of goodwill during the acquisition transaction. In actual, this goodwill was the loss on securities investments. Subsequently, the goodwill (losses) was amortized. This amortization allowed the company to spread its losses over several accounting periods (Olympus Corporation - The Third party Committee, 2011). The fraud could have been detected earlier if the auditors of Klynveld Peat Marwick Goerdeler (KPMG) and Ernst and Young (EY) had acted with due diligence and care. If they had exercised professional judgment, then the critical determination and assessment of investment transactions would have brought this fraud to light earlier than 2011. The newly appointed Chief Executive of Olympus was in a position to detect the severity of transactions at an early stage of his tenure then the question arises that why could not the auditors detect this fraudulent transaction? As a result of this fraud, three executive of the company were fined for 700 million Japanese Yen. Furthermore, six banks sued Olympus for about $273 million. These damages were filed for the losses that these banks incurred as a result of a drop in the company’s stock price after the 13-year old fraud was discovered (Bloomberg, 2014). This accounting scandal relates to the Futures Trading Company that perpetrated a fraud of $211 million. The fraud was committed by intercepting the bank confirmation process. The fraud continued for 20 years. Initially, when banks did not have the facility of any online confirmation, Russell Wasendorf Sr., who was the CEO of the company, changed the address of the bank’s branch. When the confirmation was received, he then forged the address the bank’s branch and replaced it with the