Creative Accounting, Fraud and International Accounting Scandals -- Contents -- List of Contributors -- Preface -- Acknowledgements -- PART A -- 1 Introduction - Setting the Scene -- 1.1 Introduction -- 1.2 Exploring the Terms -- 1.2.1 Creative Accounting -- 1.2.2 Fraud -- 1.2.3 Other Terms -- 1.3 Structure of the Book -- 1.3.1 Increase Income -- 1.3.2 Decrease Expenses -- 1.3.3 Increase Assets -- 1.3.4 Decrease Liabilities -- 1.4 Conclusion -- 2 The Creative Accounting and Fraud Environment -- 2.1 Introduction -- 2.2 The Main Actors -- 2.2.1 Managers -- 2.2.2 Investment Analysts -- 2.2.3 Regulators -- 2.2.4 Auditors -- 2.2.5 Shareholders -- 2.2.6 Merchant Banks -- 2.2.7 Other Users -- 2.2.8 Legal Authorities -- 2.3 Effective Corporate Governance -- 2.3.1 Effective Internal Controls -- 2.3.2 Division of the Responsibility between Chief Executive and Chairman -- 2.3.3 Audit Committee -- 2.3.4 Independent Board of Directors -- 2.4 Economic Environment -- 2.5 Conclusion -- 3 Motivations to Indulge in Creative Accounting and Fraud -- 3.1 Introduction -- 3.1.1 Personal Incentives -- 3.1.2 Market Expectations -- 3.1.3 Special Circumstances -- 3.1.4 Cover-up Fraud -- 3.2 Conclusion -- 4 Methods of Creative Accounting and Fraud -- 4.1 Introduction -- 4.2 Basic Principles -- 4.3 Nature of Accounting -- 4.4 Methods of Creative Accounting -- 4.4.1 Strategy 1: Increase Income -- 4.4.2 Strategy 2: Decrease Expenses -- 4.4.3 Strategy 3: Increase Assets -- 4.4.4 Strategy 4: Decrease Liabilities -- 4.4.5 Strategy 5: Increase Operating Cash Flow -- 4.5 Simple Numerical Example -- 4.6 Fraud -- 4.6.1 Misappropriation of Assets -- 4.6.2 Fictitious Transactions -- 4.7 Conclusion -- 5 Evidence for Creative Accounting and Fraud -- 5.1 Introduction -- 5.2 The Descriptive Studies -- 5.2.1 Ian Griffiths, Creative Accounting (1986).

5.2.2 County Natwest WoodMac, Company Pathology (1991) -- 5.2.3 UBS Phillips & Drew, Accounting for Growth (1991) -- 5.2.4 Trevor Pijper, Creative Accounting (1993) -- 5.2.5 Frank Clarke, Graeme Dean and Kyle Oliver, Corporate Collapse: Accounting, Regulatory and Ethical Failure (2003, first issued 1997) -- 5.2.6 Frank Clarke and Graeme Dean, Indecent Disclosure: Gilding the Corporate Lily (2007) -- 5.2.7 McBarnet and Whelan, Creative Accounting and the Cross-eyed Javelin Thrower (1999) -- 5.2.8 Charles Mulford and Eugene Comiskey, The Financial Numbers Game (2002) -- 5.2.9 Beasley, Carcello and Hermanson, Fraudulent Financial Reporting 1987-1997: An Analysis of U.S. Public Companies (1999) -- 5.2.10 Joseph Wells, Principles of Fraud Examination (2005) -- 5.3 The Statistical Studies -- 5.3.1 Earnings Management Studies -- 5.4 Conclusion -- 6 Impression Management -- 6.1 Introduction -- 6.1.1 Accounting Narratives -- 6.1.2 Graphs -- 6.2 Conclusion -- 7 Taking the Long View: Accounting Scandals over Time -- 7.1 Introduction -- 7.1.1 Ancient and Medieval -- 7.1.2 Seventeenth and Eighteenth Centuries -- 7.1.3 Nineteenth Century -- 7.1.4 Twentieth Century: Before Second World War -- 7.1.5 Twentieth Century: 1945-1980s -- 7.2 Conclusion -- PART B -- 8 Accounting Scandals in Australia since the Late 1980s -- 8.1 Introduction -- 8.2 Overview of Accounting Scandals during and since the 1890s -- 8.3 Case Studies of Accounting Scandals since the Late 1980s -- 8.3.1 Adelaide Steamship -- 8.3.2 Bond Corporation -- 8.3.3 Harris Scarfe -- 8.3.4 One.Tel -- 8.4 HIH Insurance -- 8.4.1 Background -- 8.4.2 Why did HIH Collapse? -- 8.4.3 Accounting Issues -- 8.4.4 Legal Outcomes Arising from the HIH Collapse -- 8.5 Corporate Governance Reforms Following the Accounting Scandals of the Early 2000s -- 8.6 Conclusion -- 9 Corporate Accounting Scandals in China.

9.1 Introduction -- 9.2 Summary of Corporate Scandals -- 9.2.1 Shenzhen Yuanye -- 9.2.2 Great Wall Fund Raising -- 9.2.3 Hongguang -- 9.2.4 Daqing Lianyi -- 9.2.5 Kangsai Group -- 9.2.6 Lantian Gufen -- 9.3 A Case in Depth - Zhengzhou Baiwen -- 9.3.1 Background -- 9.3.2 Themes of the Scandal -- 9.3.3 Who is to Blame? -- 9.3.4 Consequences of the Baiwen Scandal -- 9.3.5 Aftermath -- 9.4 Conclusion -- 10 Accounting Scandals in Germany -- 10.1 Introduction -- 10.2 Accounting Scandals Between 1985 and 2006 -- 10.2.1 Co op AG (1988) -- 10.2.2 Balsam AG (1994) -- 10.2.3 Bremer Vulkan Verbund AG (1995) -- 10.2.4 Philipp Holzmann AG (1999) -- 10.3 Most Important Cases: Flowtex and Comroad -- 10.3.1 Flowtex Gmbh & Co. KG (2000) -- 10.3.2 ComRoad AG (2001) -- 10.4 Accounting Scandals and Regulatory Responses -- 10.5 Examinations of the German Financial Reporting Enforcement Panel 2005-2006 -- 10.6 Conclusion -- 11 Creative Accounting and Fraud in Greece -- 11.1 Introduction -- 11.2 Two Accounting Scandals -- 11.2.1 ETBA Finance -- 11.2.2 Dynamic Life -- 11.3 The Bank of Crete Scandal -- 11.3.1 Koskotas's Employment with the Bank of Crete -- 11.3.2 The Accounting Information Systems of the Time -- 11.3.3 The Economic Environment at that Time -- 11.4 The Aftermath -- 11.5 Conclusions -- 12 Corporate Creative Accounting in India: Extent and Consequences -- 12.1 Introduction -- 12.2 Some Examples of Creative Accounting in India -- 12.3 Some Important Corporate Cases in India -- 12.4 The Satyam Computer Services Ltd Scandal (2009) -- 12.4.1 Background -- 12.4.2 Satyam: A Global Organisation -- 12.4.3 Alleged Possible Processes and their Impact -- 12.4.4 Good Guy, Bad Choices -- 12.4.5 Role of the Auditors -- 12.4.6 Institution of Legal Proceedings -- 12.4.7 Salvaging Satyam -- 12.4.8 Rebuilding the Corporate Image -- 12.4.9 Some Antidotes -- 12.5 Aftermath.

12.5.1 Changes in the Companies Act -- 12.5.2 Measures Taken by the SEBI -- 12.5.3 Prudential Norms of the RBI -- 12.6 Conclusion -- 12.7 Acknowledgements -- 13 Creative Accounting and Accounting Scandals in Italy -- 13.1 Introduction -- 13.2 Creative Accounting Practices in Italy: A Case Study Analysis -- 13.2.1 The Choice of Consolidation Technique -- 13.2.2 The Accounting of Stock Options -- 13.2.3 The Accounting of 'Creative Gains' in Football Club Companies -- 13.3 The Most Important Accounting Fraud in Italy: The Parmalat Case -- 13.3.1 Parmalat: Was it a Case of Creative Accounting or of False Accounting? -- 13.3.2 Key Accounting Issues at Parmalat: Some Examples of the Accounting Fraud -- 13.3.3 The Role of Corporate Governance Actors -- 13.3.4 The Role of Information Demand-side Actors: Institutional Investors, Financial Analysts and Banks -- 13.4 The Aftermath of the Parmalat Scandal and its Impact on Business and Society -- 13.5 Conclusion -- 14 Creative Accounting and Accounting Scandals in Japan -- 14.1 Introduction -- 14.2 Accounting Regulations and Standards in Japan -- 14.2.1 Accounting Regulations -- 14.2.2 Accounting Standards -- 14.3 Short History of Accounting Scandals Before the 1980s -- 14.4 Three Types of Accounting Scandal Post-1980s -- 14.4.1 Accounting Scandal to Maintain High Share Prices -- 14.4.2 Accounting Scandal Related to Contracts -- 14.4.3 Accounting Scandal to Avoid Bankruptcy -- 14.5 Consequences of the Accounting Scandals -- 14.5.1 Revision of Accounting Standards for Consolidated Financial Statements -- 14.5.2 Reorganization of Audit Firms -- 14.5.3 Establishing Internal Control Systems -- 14.6 Conclusion -- 15 Financial Accounting Scandals in the Netherlands -- 15.1 Introduction -- 15.2 Some Minor Accounting Scandals -- 15.2.1 Creative Accounting at Rijn-Schelde-Verolme (RSV).

15.2.2 Creative Accounting at Fokker -- 15.3 Royal Ahold -- 15.3.1 Consolidation of Joint Ventures at Royal Ahold -- 15.3.2 Consolidation Accounting in the Netherlands -- 15.3.3 Consolidation Accounting under US GAAP -- 15.3.4 The Control and Side Letters -- 15.3.5 Accounting for Vendor Allowances at US Foodservice (USF) -- 15.3.6 Proper Accounting Treatment Vendor Allowances -- 15.3.7 Measures Taken by Royal Ahold after Discovering the Fraud -- 15.3.8 Acquisition Accounting -- 15.3.9 Reserves, Allowances and Provisions -- 15.3.10 Lease Accounting -- 15.4 Conclusion -- 16 Creative Accounting and Financial Scandals in Spain -- 16.1 Introduction -- 16.2 Accounting Scandals in Spain Since the 1980s -- 16.2.1 The Banking Sector -- 16.2.2 Investment Service Firms -- 16.2.3 The Real Estate Sector: The Case of PSV and IGS -- 16.3 Investments in Stamps: The Latest Series of Financial Scandals in the Country. Afinsa and Fórum Filatélico -- 16.3.1 Background of the Cases of Afinsa and Fórum Filatélico -- 16.3.2 The Nature of the Businesses and the Accounting for Investment Contracts -- 16.3.3 The Suppliers -- 16.3.4 Valuation of Stamps -- 16.3.5 Reflections on the Scandal -- 16.3.6 Where were the Auditors? -- 16.3.7 Was it a Surprise? -- 16.3.8 Consequences of the Scandal -- 16.4 The Aftermath of the Scandals -- 16.5 Conclusion -- 17 Accounting Scandals in Sweden - A Long Tradition -- 17.1 Introduction -- 17.2 Fermenta and Prosolvia: Swedish Stock Market Darlings -- 17.2.1 Fermenta - 1980s Biotech Company's Accounting Errors -- 17.2.2 Prosolvia - 1990s Experts in Simulating Virtual Reality? -- 17.2.3 Reconstruction of Ownership -- 17.2.4 Fictitious Invoices, Invented Agreements and Premature Income Recognition -- 17.2.5 Insider Trading -- 17.3 Two Scandals in Multinationals that Dominated the Swedish Media -- 17.3.1 ABB - Shaken and Stirred.

17.3.2 Skandia - A Shooting Star Turns into a White Dwarf.