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Posts Tagged ‘Tracy Coenen’

Last week I wrote (GRATA’s Non-Grata News) about Senator Chuck Grassley’s (R-Iowa) inquiry into the SEC destruction of evidence.  Most journalists and bloggers have led with splashy headlines.  However, there have been a few voices of sound reason, such as Broc Romanek of CorporateCounsel.net and Tracy Coenen of The Fraud Files Blog.

Much discussion has assumed that valuable evidence is being destroyed when the SEC discards MUI (matters under investigation).  This is not necessarily so, as Broc Romanek explains in “A Little Debunking of the SEC’s Records Destruction: What is a MUI?

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This summer I am working in the area of fraud.  If all goes well, perhaps someday there will be three or four baby articles cooing to be picked up and read.  Why fraud?  It’s more recognizable as accounting than either learning effectiveness or social media.

So I set out to learn as much about fraud as I could.  There are dozens and dozens of articles, both practitioner and academic.  Finally, I came across Tracy Coenen’s most wonderful book, Essentials of Corporate Fraud.

Before settling on a researchable issue, I like to get a handle on the big picture.  So, I put together some ideas from Tracy’s book, my prior knowledge base, and some of the articles, and came up with “The Big Picture of Fraud.”

The big picture of fraud. Each arrow points from who is perpetrating the fraud to who is being defrauded. (c) Albrecht

Although some think insiders are able to wreak the most damage on a corporate business, I disagree.  In one of the largest frauds in history, Bernie Madoff stole $50 billion USD from investors in a classic ponzi scheme.  In the decade from 2001 to 2010, investors typically reacted by lopping an average of 25% from the capitalized value of companies announcing financial restatements.  Many organizations spend much more on IT security to protect the company from outsiders than they spend on fraud prevention activities.

You might ask, do companies intentionally steal from outsiders such as insurance companies, suppliers, customers, and investors?  The answer is that some do.  Jonathan Marks of Crowe Horwath writes,

Sam E. Antar was welcomed into a life of crime at age 14 when he became a stock boy in the family business, Crazy Eddie, Inc. From the beginning, he was involved in cash skimming and overstating insurance loss claims. Antar says he never questioned the business methods of the famous consumer electronics retailer. As the CFO and a crafty CPA, Antar cooked the books of Crazy Eddie for many years – skimming profits, evading taxes, laundering cash, and committing securities fraud – until the company collapsed in 1987.

Antar’s illicit activities were abetted by the Crazy Eddie culture, which promoted fraud from within and made clear that no money should go to the government. Cash sales were routinely skimmed, and frontline employees were paid in cash to avoid taxes.

I’ll write more later this week.

Debit and credit – – David Albercht

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[Ever get something wrong?  I made an error in the first version of this post (March 9, 2010).  I have fixed the error.  My apology to several fine people for implying they are accounting pornographers.  They aren’t.]

We get into some strange conversations over on AECM (Accounting Education Using Computers and Multimedia), the listserv for accounting professors.  One started out innocently enough, then took a exotic turn in the direction of wierd.

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Today I shine a bright light on some blog posts that are not only interesting, but also imaginative and compelling.   More than posts, they truly are articles in the fine tradition of business journalism.   They are examples of a powerful force in accounting news.

In a perfect world, everyone would have a focus on current events.   I recently wrote the following in “Questions From a Future Blogger” (Jan. 14, 2010).

Accounting and/or financial blogs are a big deal. As the world evolves and becomes faster paced, long-lived jobs will disappear. We accountants will adapt by piecing together a career from many project-length opportunities. I believe it will be a matter of professional life or death for accountants to get on top of evolving current events and stay there. For there to be life, we all need to make life-long learning a lifestyle …

How will we learn to think [new] ways and grow our thinking? Independent blogs commentaries like The Summa, and re: The Auditors, and TaxGirl. Blogs provide input to fuel critical thinking, seeds for creating thinking, and energy for practical thinking.

The purpose of today’s installment of The Summa is to bring a few of last week’s best and smartest to your attention.  By doing so, I hope to whet your appetite for the good stories to be written this coming week.  These are the must reads.

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