Accounting Practices & Scandals

-B.V.Raghunandan, SVS Collge, Bantwal

Besant Women’s College,Mangalore.

September 3, 2009

Double Entry System

One of the Greatest Discovery of Mankind Discovered by Luca Pacioli Inspired by Newton’s Third Law of Motion Only Comprehensive System of Book-

Keeping Stability, Flexibility and Agility Compatible for Computerised Accounting

Accounting Principles

Evolved by Practice Fixed Assets at Opening Balance less

Depreciation Current Assets at Closing Values Accounting Conventions and Concepts Simplicity and Stability in the Long Run Accounting was a Passive Function of

Management

Genesis of Vested Interest

Managerial Bonus as a Percentage of Profit Joint Stock Form of Organisation Listing of Shares on a Stock Exchange International Raising of Finance Meeting Shareholders’ Expectation Investment Analysts Quarterly Reporting Accounting became an Active Managerial

Function

Manipulation of Figures

Accounting Professionals Auditing Creative Accounting Auditor-Management Nexus Need for Concealment of Manipulation Making Accounting Complex Making Annual Reports Voluminous Attractive Annual Reports

Means of Scandals

Accounting Standards Auditor: Policeman-Thief-Forensic Expert Elaborate Reporting So- Called Transparency in Accounting Credit Rating Agencies Band-Wagon Mentality Cash Oriented Conscience Professional Managers

Accounting Standards

Started at the Initiative of IOSCO Uniformity Defeated at the Inception Different Standards for Different Countries Complex in Nature Ever-Changing in Nature Too Many Standards Impossibility of Off Hand Preparation of

Annual Reports

Auditor: Policeman-Thief-Forensic Expert

Not a Watch Dog any more Party to Sharing the Loot Guided the Companies in Manipulation of

Accounts Helped Accounting Bodies to Prepare

Accounting Standards Helped Clients in Violating Accounting

Standards Investigated Accounting Violations

Elaborate Reporting

Voluminous Reports Expensive Reporting Led to Delisting of Shares Wasteful Expenditure in Creating a Hype Efforts to Cultivate Media Coming up with New Practices like Segment

Reporting, Related Party Disclosure Proliferation of Statements like Cash Flow

Statements and Fund Flow Statements

Transparency in Accounting

Too Many Details Too Many Statements Impressive Accounting Photo Features of Smiling Faces Expensive Reports Vital Information was always Sensitive Technical Details and Jargon

Credit Rating Agencies

Third Party Certification Part of Groupthink for a Fee Changed rating on Generalities Lot of Vested Interest in Rating A Ring of Bandits Increased the Financial Cost of Operation Multiple and Varied Rates Shopping for Rating

Band Wagon Mentality

Impressive Operations

Empty Service Professional

Mutual Agreement Clu

No Investigative Effort for the Unfurnished Facts

Cash Oriented Conscience

Slavery to Remuneration & Perquisites

Selfish and Self-Centered Attitud

No Protection to Whistle Blower

All Pervading Cowardice

Unpracticing Values and Hypocrisy

Professional Managers

Gypsies in Search of Treasure Need to Exploit the Organisation and Run Qualification and Empty Work Experience and

Not Quality Highly Commercialised Culture Expensive Services Responsible for manipulation

Agenda

Simplification Scrapping Accounting Standards Basic Annual Reports Scrapping Credit Rating agencies Loyal Managers Scrapping Empty Professional Services

THANK YOU