Question

2. The past several years have seen a number of significant accounting scandals have been uncovered across the business world in companies ranging from tech companies like Hewlett Packard and Groupon, to snack companies like Diamond Foods, and camera and medical equipment maker Olympus. Research online news sites to find a recent accounting scandal, and using concepts and terms from this chapter, describe the violations committed by the company.

Answer 1

A recent accounting scandal to hit corporate world is with regards to Truckload Freight Company. In 2019 the Securities and Exchange Commission (SEC) charged the company with accounting fraud. The company was doing accounting fraud by not disclosing substantial losses and misrepresenting its financial condition. The company did not recognize at least $20 million in impairment charges and losses. It avoided recognizing these charges by selling and buying used trucks at inflated prices from third parties. This led to overstating of its pre-tax income as well as its net income.

The violations committed by the company included violations of the SEC’s norms and accounting framework like GAAP and FASB which requires companies to present a fair and proper position of their financial health through their financial statements. There were internal control violations as well in this case and the company did not have proper processes to help it achieve its objectives toward operational efficiency and effectiveness.