control, and governance
THERE’S NO ACCOUNTING FOR FRAUD
A recent CFO article reports that the U.S. Securities and Exchange Commission (SEC) has charged two Diebold Inc. chief financial officers (CFOs) and a former deputy of corporate accounting with accounting fraud and is seeking reimbursement of cash bonuses, stock, and stock options dispersed between 2002 and 2007 while the alleged fraud was being committed. The SEC asserts that the executives inflated the company’s earnings to meet analysts’ forecasts through fraudulent use of bill-and-hold accounting, improper recognition of lease-agreement revenue, manipulation of reserves and accruals, fraudulently delaying and capitalizing expenses, and improperly writing up the value of used inventory. According to the SEC, Diebold filed at least 40 annual, quarterly, and other reports with the agency during that time, as well as issued press releases that contained material misstatements and omissions related to the company’s financial performance.
How could the alleged fraud have eluded internal auditors for five years? What controls should have been in place to prevent the executives from inflating the company’s earnings?
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