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Recent incidences of corporate or banking scandals happened in U.S companies or financial insitutions - Essay Example
Finance & Accounting
Pages 3 (753 words)
Corporate scandals and executive misbehaviors have been on the increase in recent years. In fact, some companies in the U.S. have become bankrupt and forced into liquidation due to corporate scandals and misbehaviors. …
At the same time, the Lehman Brothers reduced assets on the left side of the company’s statement of financial position. The Lehman Brothers also systematically used the repos to finance some projects. Instead of reporting that the repos were used for financing reasons, the Lehman Brothers disclosed the repos as asset sales to mislead investors (Elliott and Treanor 5). This allowed the Lehman Brothers to use the proceeds gained from the repo to reduce its leverage right just before the reporting period. By September 2008, the repo proceeds had reached $50 billion resulting in bankruptcy. The investigators were amazed to learn that this amount was even more than the bonds that were due at the time General Motors went bankrupt the previous year. The repo proceeds were also comparable to the gross domestic product of Switzerland in 2008. Amazingly, the top executives of the company then, including its CEO Dick Fuld denied any knowledge of the company’s use of Repo 105 (Elliott and Treanor 5). It was also amazing that Ernst & Young, the leading audit firm for the company gave unqualified report without noting the misstatements in the company’s books of account. ...
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