Reference no: EM132173954

Question: Maria Hernandez

In the world of business there are regulations to help a business succeed. Inevitably, there is also frauds that can take place and there are examples from businesses that have been through these unfortunate events. These events often deal with the top management of the companies and there have been numerous reports through history that have affected major corporations.

For instance, Gary Giroux (2008) mentioned the investigation that the company, WorldCom, went through in 2002 (Giroux, pg. 1206, 2008). What happened with WorldCom was that they had an accounting fraud for their mismanagement of $3.8 billion dollars that resulted in their bankruptcy declaration (Giroux, pg. 1206, 2008). The financial statement from WorldCom discovered that the amount of money that was mishandled was reaching the amount of $10 billion dollars (Giroux, pg. 1206, 2008). This was a major scandal for WorldCom and after the investigation took place there was more information that came out regarding top management. "Former WorldCom chief financial officer (CFO) Scott Sullivan was charged in the multibillion-dollar accounting fraud..." (Giroux, pg. 1228, 2008). This shows how top management personnel can take advantage of how much a business is doing and corruptly mishandle that money.

Another example comes from the company Enron. Agarwal, G. K. and Medury, Y. (2014) described Enron's fraud as, "...one of the biggest accounting frauds of modern world but also because it brought to light dubious accounting policies which may never be accepted by any professional with common sense..." (Agarwal, G. K. & Medury, Y., pg. 9, 2014).

A recent example of this happened with the former Sacramento Kings executive. Sam Stanton and Darrell Smith (2018) detailed the incident in their article published by, The Sacramento Bee where it stated that Jeffrey R. David, who was the former executive had left traces that showed actions on his behalf of large amounts of money mishandled for unappropriated usage (Stanton, S. & Smith, D., par. 2, 2018). "Internal Kings documents say emails recovered in the team's probe include communications between David and a bank regarding the purchase of a $2.5 million to $3 million jet and that other computer files left behind by David set off alarms," (Stanton, S. & Smith, D., 2018). These were some of the initial facts that were discovered as the investigation was taking place.

A policy was put in place was The Sarbanes-Oxley Act. Giroux (2008) mentioned that this policy was put in place since 2002 and it was to regulate, oversee and give a fast response in behalf of the federal government to problems of this magnitude in order to reduce the frequency and keep businesses regulated (Giroux, pg. 1234, 2008).

Overall, the importance of keeping all financial statements regulated within a business is essential. Regulation and cross reference to check for any faults is a must so that a business can succeed. From the examples given there is a common aspect that top management can be at fault for thinking it is easy to get away with mishandling money. However, with policies like the Sarbanes-Oxley Act there can be more regulations and can take down anyone that is corrupt.