Accounting Irregularities

Chinese Official: Some Companies Listed in U.S. Have ‘Flaws,’ May Not Know What the Hell They’re Doing

We understand that complying with financial reporting in the U.S. can be difficult, so don’t get too worried about it. But we do ask that you keep the workpaper hostage taking to a minimum.

China is looking into accounting issues involving Chinese companies listed in North America, an official at the country’s securities regulator said in the watchdog’s first public remarks since a series of accounting scandals. Corporate misbehaviour, unfamiliarity with the U.S. market and some practices involved in overseas listings had all contributed to recent investor distrust of Chinese companies, said Wang Ou, vice head of research at the China Securities Regulatory Commission (CSRC). “First, we have to admit that some of our companies may have flaws. Second, our (companies’) understanding of the U.S. market and the measures to tackle risk there may be inadequate,” Wang said at a conference in Beijing this weekend. “We have contacts with the U.S. and its relevant regulatory bodies and we’re studying the issue together.”

Oh, and it isn’t necessary to issue a press release when your auditor ties out your cash balances.

[via Reuters]

Study: Founder CEOs Blame CFOs More Often for Accounting Irregularities

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

Not that CFOs shouldn’t be blamed for irregularities but at least you’ll know what to expect.

Remember how

Do Recessions Cause Accounting Irregularities?

Thumbnail image for Cooking the Books.jpgSome people think so. Emily Chasan at Reuters discusses the perceived rise of accounting irregularities today:

“Corporate balance sheets may be showing signs of the wear and tear from the prolonged U.S. recession as accounting irregularities are starting to surface at growing numbers at U.S. companies.”
Okay but don’t accounting regularities happen all the time? If the economy is humming along nicely does that mean that less companies are engaging in accounting hocus-pocus? Hmmmmm.


But there’s more argument for “it’s the economy stupid”:

“Statistically you can show any time you have a recession or some type of tremendous decline in an economy you’re going to see financial pressures on companies,” said Bruce Dorris, program director at the Association of Certified Fraud Examiners, noting that corporate employees can sometimes be motivated to be overly aggressive with accounting or commit outright fraud to meet targets, particularly in difficult economic times.

The article cites Apollo Group’s stock dropping 18% yesterday after announcing that the SEC was starting an “informal inquiry” into its revenue recognition policies. It also lists Overstock.com, Town Sport International Holdings (owns NYSC), Zale Corp and also Huron Consulting whose stock price is still down 40% since the announcement of the SEC investigation. All these companies have delayed earnings reports or had investigations into their accounting practices.

So feel free to discuss your clients and their creative nature in this economy. Are their hard-nosed GAAP puritan ways caving to earnings pressure or are your partners the ones caving in the name of client service? Nobody wants a to be working on a client that’s going through a restatement. Nobody.

Accounting irregularities may be on the rise in U.S. [Reuters]