Posted by & filed under Accounting Principles, Advanced Accounting, All Articles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, IFRS, Intermediate Accounting, International Accounting, Managerial Accounting, Uncategorized.

Joel Bondy, executive director of the Office of Payroll Administration in New York City since April 2004, is at the heart of an alleged $80 million information technology fraud scheme. He has been suspended without pay since December 16, 2010, by Mayor Michael R. Bloomberg and Comptroller John C. Liu, pending investigation. Federal prosecutors have alleged a connection between Mr. Bondy and IT several consultants in a scheme that manipulated the city into steering expensive contracts to businesses that they controlled, and of redirecting some of that money for their own enrichment.

Questions:
1. What controls would have helped prevent the alleged allegations?
2. Why is this type of fraud among the most difficult to prevent?
3.  Look at the ACFE 2010 Report to the Nations on Occupational Fraud and Abuse (See http://www.acfe.com/rttn/rttn-2010.pdf).  If fraud is proven, did this fraud span a period less than average, about average, or longer than average?
 
Source:
Chen, D.W. and J. Eligon. (2010). Director of City Agency at Center of Fraud Case Is Suspended. The New York Times, December 16 (Retrievable online at http://www.nytimes.com/2010/12/17/nyregion/17citytime.html?_r=1&nl=nyregion&adxnnl=1&emc=ura1&adxnnlx=1292770876-WsWnBf5l9P1Q04+cdf0vHg)

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While the Chevrolet Volt and the Nissan Leaf have gotten a lot of attention about their electric vehicle status, Ford said on Tuesday, December 7th,  that it had started shipping a battery-powered version of a delivery van, known as the Transit Connect Electric, to several business customers, including AT&T, the Canada Post, the New York Power Authority, and Southern California Edison. Development of the electric van began 13 months ago — about three years after G.M. had started work on the Volt.  It can be driven nearly 400 miles between recharging and refueling, but has no secondary power source. The electric Transit Connect costs $57,400, which is more than double the price of the gas-powered version even after federal and any state or local incentives for electric vehicles are factored in.

Questions:

1. Assume that AT&T is evaluating the purchase of vans. The gas-powered vans average 30 miles per gallon of gas at an average price of $2.80 per gallon.  The company will use the vans 288 days a year and plans to drive each van a maximum of 400 miles per day. They project that they will keep the vans 6 years and the vans will have no salvage value. AT&T has estimated that each electric van will require approximately $4 per day in charging and repair costs.  Each type of van (gas or electric) is involved in generating the same amount of annual sales of $72,000.  If you assume that the gas-powered van has the same economic life and salvage value as the electric van and is half the price of the electric van (projected cost of $57,400 per van), determine the average rate of return for each type of van. Show your work.

2. Using information from #1 and assuming that AT&T has estimated that both types of vans will be responsible for equal annual cash flows of $12,000, what is the payback period for the electric van versus the gas-powered van? Show your work and discuss whether the company should make this investment in terms of your payback analysis.

3.  What are some of the qualitative factors that should also be considered when making this investment?

Source:

Bunkley, Nick. (2010). Ford Starts to Ship an Electric Delivery Van. The New York Times, December 7. (Retrievable online at http://www.nytimes.com/2010/12/08/business/08electric.html?_r=3&ref=business)

Posted by & filed under Accounting Principles, Advanced Accounting, All Articles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, IFRS, Intermediate Accounting, International Accounting, Managerial Accounting, Uncategorized, Video Updates.

HSBC prolonged disgraced financier Bernard Madoff’s ability to burn investors by “engineering a labyrinth” of international sources of funding for his epic Ponzi scheme, a court-appointed trustee alleged Sunday.

Trustee Irving Picard announced a lawsuit in federal bankruptcy court in Manhattan that seeks to recover $9 billion in illicit earnings and damages from the Britain-based bank.

The suit alleges that HSBC ignored warnings from its own accountants that Madoff’s phenomenal investment record was suspect.

Questions:

1. What is Irving Picard’s role in this scandal?

2. What is Irving Picard’s background and why is this important from an accounting standpoint?

3.  What is the alleged motivation of HSBC in this scandal?

Source:

Fox News Video with Robert Gray (2010). Picard Sues HSBC, December 6 (Retrievable online at

http://www.youtube.com/watch?v=cwf7UHRX0-A)

 Hays, Tom (2010). Madoff Trustee Sues HSBC for $9 Billion, HuffingtonPost.com, December 5 (Retrievable online at http://www.huffingtonpost.com/2010/12/06/madoff-trustee-sues-hsbc-_n_792365.html)

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According to this year’s National Retail Federation holiday survey, the average American will spend close to $700 this season on gifts, cards, decorations, and the like. This is one time when you want to be below average — way below. In fact, if you are in debt, just say no to gift buying this holiday. There is absolutely NO reason for you to go further into debt buying gifts for others. There are still 13.6 million Americans who are trying to pay off holiday debt from last year.

 Questions:

 1.  Which of the tips mentioned in the article would help you the most in steering clear of holiday debt? Explain.

2. Go to GiftCards.com and click on Discounted Gift Cards.  Select “View All Available Gift Cards” and then pick one of the merchants that you would normally visit.  Assume that you buy the card.  What journal entry would this merchant make for the sale of this card? (In your answer, assume that the merchant must pay GiftCards.com a transaction fee of 1%.)

3.  Assume that you redeem the card that you purchased in Question 2.  What journal entry would the merchant make for the redemption?

 Source:

Pagliarini, Robert (2010). 10 Tips to Save Big Money This Christmas.  HuffingtonPost.com, December 8 (Retrievable online at http://www.huffingtonpost.com/robert-pagliarini/10-tips-to-save-big-money_b_793857.html)

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New York’s top court ruled Wednesday that state law allows people to buy life insurance policies and immediately sell them to investors who make money when the insured person dies. The Court of Appeals, in a 5-2 ruling, said the practice is legal in New York even where the policy was obtained solely for that purpose. The case involved transactions before the law was amended by the Legislature last year to regulate so-called “stranger originated life insurance,” or STOLIs. Those changes took effect in May. The amendment prohibits intermediaries, without any personal interest in an insured individual, from arranging or planning in advance for someone to obtain a policy and designate the intermediary as beneficiary. It also prohibits such transfers, or life settlement contracts, for two years after a policy is issued.

The court majority concluded that state law permits an insured adult, acting “on his own initiative,” to get a life insurance policy for the benefit of any person, firm, association or corporation he or she chooses.  According to the American Council of Life Insurers, more than 30 state have enacted laws in the last few years to curb or regulate the practice.

Questions:

1.  What is “dead peasant” insurance, why has it been in the news in recent years,  and what are some recent regulations to it?

2.  Why do you think the court included a two year waiting period?

3.  If a person obtained a life insurance policy for the benefit of a non-profit organization, how should the non-profit organization account for it? Discuss.

 

Source:

Staff. (2010). New York Court OKs Reselling Life Insurance, Syracuse.com, November 17. (Retrievable online at http://www.syracuse.com/news/index.ssf/2010/11/new_york_court_oks_reselling_l.html)

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Any publicity, even negative publicity, means a win with Google’s ranking algorithms. This New York Times story details a retailer known as DecorMyEyes.com who first hired a search optimization company to burnish the site’s reputation by writing positive things about the company, but then stumbled on a better “free” success strategy of providing poor customer service and racking up negative complaints to  push the company higher in Google search results, leading to even greater sales.

Questions:

1. The New York Times article focused on Google, but what does Sullivan say about other search engines?

2. According to the articles, is DecorMyEyes.com right? Could all those bad reviews be helping sales?  Discuss costs and benefits, both long-term and short-term.

3. The original insight behind page rank used in search engines came from academia, where the importance of a paper can be measured by the citation index, i.e. how many other papers refer to it. Brainstorm and discuss ways which make more sense for displaying higher ranking or hits from a performance evaluation standpoint.

Source:

Segal, D. (2010).  A Bully Finds A Pulpit on the Web. The New York Times, November 28. (Retrievable online at http://www.nytimes.com/2010/11/28/business/28borker.html?_r=1)

Sullivan, D. (2010). Google’s “Gold Standard” Search Results Take Big Hit In New York Times Story, Search Engine Land, November 28. (Retrievable online at http://searchengineland.com/googles-gold-standard-results-take-hit-new-york-times-57081)

Posted by & filed under Accounting Principles, Advanced Accounting, All Articles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, IFRS, Intermediate Accounting, International Accounting, Managerial Accounting, Uncategorized, Video Updates.

     U.S. Loan Auditors and similar outfits are promising to conduct “forensic audits” of mortgage transactions to find evidence of “predatory lending” and fraud, and use that evidence to haul lenders into court and obtain new mortgages at far more favorable interest rates, officials say.

     In October, California Attorney General Jerry Brown sued U.S. Loan Auditors, its legal arm My U.S. Legal Services and the companies’ owners for $60 million, accusing them of scamming hundreds of homeowners out of anywhere from several thousand dollars to, in one case, $55,000. The suit demands civil penalties, restitution for victims and injunctions to block the company from making false claims.

Questions:

1. Do you think the name of the company is what has inspired trust by so many homeowners? Explain.
2. Based on the article, how do you think the scam works? What were U.S. Loan Auditors’ business model and claims? Explain why you think U.S. Loan Auditors has been so successful in bilking homeowners. Present your answer in terms of the fraud triangle.
3. “A spokesman for Brown’s office said no gag order has been imposed.” What is a gag order?

Source:

Wright, D., E. Harper, F. Biberica, and J. Siegel. (2010). Officials: New Foreclosure Scam Preys on Desperate Homeowners, ABC News.com (Retrievable online at http://abcnews.go.com/US/officials-foreclosure-scam-preys-desperate-homeowners/story?id=12260372&page=1)

Posted by & filed under Accounting Principles, Advanced Accounting, All Articles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, IFRS, Intermediate Accounting, International Accounting, Managerial Accounting, Uncategorized, Video Updates.

South Korea is trying to position itself as the destination of choice for medical tourists.  Dr. Won Jin Park does cosmetic surgery in South Korea at prices 30% cheaper than in Japan or the U.S. While South Korea’had about  60,000 medical tourism patients last year, Thailand had 1.5 million patients during the same period.

Questions:

1. Research medical tourism.  How did this trend start? What countries, other than the two mentioned in the video are major medical tourism countries? What is the advantage to the countries?

2. Research medical tourism.  What are the most common procedures that people travel to different contries to have performed? Discuss the benefits and costs of this trend for the patients.

3.  Would you consider traveling to another country for a medical procedure?  Why or why not?

Source:

CNN.com (2010). South Korea Markets Cosmetic Surgery, November 10 (Retrievable online at www.cnn.com)

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A Florida woman who fell behind on her car payments is suing the company she claims has been using Facebook to contact her family members in a campaign to embarrass and intimidate her into paying the debt. Melanie Beacham of St. Petersburg alerted the company, Mark One Financial, had to take a medical leave of absence from her job this summer and that she might fall behind on her monthly $362 car payments. Two months later, Mark One representatives began calling Beacham up to 20 times a day and then contacted her cousin and sister on Facebook to ask them to have Melanie call a phone number that leads to a debt collector.

Questions:

1. What are the arguments that the article says that debt collectors will claim?

2. Did Melanie do the right thing by contacting her car payment company in the first place?

3.  If Mark One Financial did as the article claims, have they violated any laws?  Discuss.

Source:

Bassett, L. (2010). Woman Sues Debt Collectors Over Alleged Facebook Harrassment. Huffington Post, November 17 (Retrieved online at http://www.huffingtonpost.com/2010/11/17/melanie-beacham-sues-debt-collectors-harassment_n_785105.html)

Posted by & filed under Accounting Principles, Advanced Accounting, All Articles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, IFRS, Intermediate Accounting, International Accounting, Managerial Accounting, Uncategorized.

A group of elite whistleblowers met in Washington, D.C. There was no media coverage of these men and women whose exploits have been heralded on 60 Minutes and Dateline, and, not incidentally, helped enrich the U.S. Treasury by more than $16 billion since 1986.

This particular group known as SWAT (Successful Whistleblowers Advocating Against Tax Payer Fraud) met to share and celebrate their stories of exposing fraudulent health-care  and pharmaceutical companies, as well as dishonest manufacturers.

Questions:

1. What is the biggest single cash recovery ever for the U.S. government, who was it against, and who was the whistleblower that aided in the recovery?

2. Based on what you read in the article, do you think the laws need to be changed as they relate to corporate fraud? Explain.

3.   If you were faced with a corporate fraud as a potential whistleblower, what are some of the things pointed out about whistleblowers in this article that you would consider? Explain.

Source:

Kelly, K. (2010). Whistleblowers: Cynical Idealists or Idealistic Cynics? Huffington Post, November 19 (Retrievable online at http://www.huffingtonpost.com/kitty-kelley/whistleblowers-cynical-id_b_785968.html)