How Did Two Companies' Reputation Survive a Fraud Scandal?

|

How Did Two Companies’ Reputation Survive a Fraud Scandal? |

Accounting Ethics Research Paper |

|

|

In the last few decades we have seen numerous companies fall victim to accounting fraud and not be able to overcome scandals and go bankrupt. A company’s reputation or lack of has tremendous influence on a company staying in business and profiting. How are companies accused of fraudulent accounting stay in business and repair their tarnished reputations? Two companies that were involved in accounting fraud but were able to stay in business are Xerox Corporation and Tyco International Limited. To understand just what they were able to accomplish it is necessary to first understand what type and how damaging the fraud was.

Xerox Corp. was under investigation in 2000 and was charged with fraud in April 2002. Essentially Xerox was not reporting revenues on an accrual basis which violated the generally accepted accounting principles (GAAP). They were reporting the revenues on leased equipment before it had been accrued to inflate numbers by over $3 billion in over four years, (Schneider, 2003). Executives perpetrated the fraud to receive bonuses and more lucrative stock sales, (Bandler & Hechinger, 2003). The investigation resulted in the SEC requiring 6 executives to pay $22 million in fines and other penalties, (Bandler & Hechinger, 2003). The Chief Executive Officer, Paul Allaire, and Chief Financial Officer, Barry Romeril, receive $1 million in civil penalties which at the time was the largest amount for individuals involved in a financial fraud case, (Bandler & Hechinger, 2003).

Tyco International Limited’s fraud case was a situation of executives stealing from the company and trying to cover it up. They had taken loans from the company without appropriate approval or notifying their shareholders. They also sold seven and a half million shares of stock for $430 million without notifying their investors, (Timeline of the Tyco...