Cover Story
Applying
Six Sigma to Finance -- Donna M Faltin
and Frederick W Faltin
In
the wake of series of corporate scandals, American regulatory
bodies are working on defining and implementing corporate
ethical behavior. To begin with, measures for improving corporate
financial reporting, detecting corporate frauds and development
of common practices across companies should take place. Six
Sigma is considered to be an appropriate tool that can address
these issues and provide a reliable framework for tracking
the financial results. The authors take the example of WorldCom
to prove how Six Sigma is helpful in achieving the objective
of best financial practices.
©
2003 American Society for Quality. The article appeared in
the Quality Progress, January 2003. Reprinted with permission.
Originally published as `Toe the Line: No More WorldComs'.
WorldCom:
Could Six Sigma Have Made a Difference?
-- Donna M Faltin and Frederick W Faltin
The
corporate scandals that started with Enron reached their peak
with the revelation of multi billion scandal at WorldCom.
The fallout of WorldCom emphasized the need for having quality
financial practices to avoid such accounting shenanigans.
Six Sigma offers a helping hand to companies in avoiding such
pitfalls. The authors apply the concept of Six Sigma to find
whether it would have made difference in the case of WorldCom.
©
2003-The Faltin Group. All Rights Reserved. Reprinted with
permission.
Case
Study
Predicting
Bankruptcy in the WorldCom Age
-- Nikolai Chuvakhin and L Wayne Gertmenian
The
wave of corporate scandals in corporate America has resulted
in many companies declaring bankruptcy. During the years 2001
and 2002, a total of 448 companies applied for bankruptcy
protection. These bankruptcies had a devastating impact on
the external parties dealing with these businesses. the bankruptcy
prediction models offer a helping hand to company executives
and business professionals in predicting bankruptcies. the
authors evaluate the model by taking WorldCom as an example.
©
Graziadio Business Report. http://gbr.pepperdine.edu. Reprinted
with permission
Corporate
Finance
Questionable
Yield -- Craig
Schneider and Tim Reason
Uncle
Sam's proposal to eliminate the double tax on corporate dividends
is expected to have wide implications on corporate America.
The motive behind this move is to encourage corporates to
pay dividends. Many companies consider paying dividend as
admitting that there are no growth opportunities. The other
issue is investors may now seek more information in the financial
statements with regard to the tax matters. The authors argue
that the move may not result in companies paying stable dividends
but instead they may like paying one-time dividends.
©
CFO Magazine, April 2003. Reprinted with permission.
Corporate
Royal
Ahold: Enter the accounting shenanigans -- Ch
Rajeshwer and Amit Singh Sisodiya
The
Royal Ahold's, the world's third largest retailer, case of
accounting malfeasance, lends weight to the growing concern
over the way retailing industry accounts for supplier rebates.
© IUP. All Rights Reserved.
Financial
Reporting
The
Dangers of Pro forma Reporting -- Kevin L James and Franklin A Michello
Pro
forma earnings statement is the most used and abused tool
in corporate America. Corporates give their interpretation
of earnings that is different from US GAAP, thus sending confusing
signals to the investing community. A recent study of earnings
by Wall Street Journal showed that in most of the cases pro
forma earnings are higher than GAAP earnings. Pro forma earnings,
in spite of all the criticisms, can offer great benefits to
shareholders if managements use it properly in giving their
interpretations about the financial results. Strong regulation
is called for the better usage of pro forma earnings statements.
©
CPA Journal, February 2003, www.cpajournal.com. Reprinted
with permission.
Technology
business
Intelligence --Michael
Burns
Businesses
in the recent past have realized the importance of business
intelligence in decision-making. But accounting community
remained far away from business intelligence. Business intelligence
is about turning data into useful information for better decision-making.
With business intelligence, one can generate a simple management
report to more comprehensive online analytical processing.
If accountants properly understand and use business intelligence,
they move into strategic decision-making arena.
©
CA Magazine, April 2003. Reprinted with permission from CA
Magazine, published by the Canadian Institute of Chartered
Accountants, Toronto, Canada. Originally published as `Accounting
for Business'.
Auditing
Get
mission critical with audit tools --Mike
Malwitz
The
accounting profession has lost its self-regulation status
in America. The rest of the world is likely to replicate the
American model. In this environment, auditors are expected
to act diligently in discharging their duties. as a result
corporates too are under compulsion to properly manage their
financial data. In this regard, Business Performance Management
offers great help to both corporates and auditors. The author
talks about the benefits offered by this tool.
©
Copyright 2002, Accountancy SA, April 2003. Reprinted with
permission.
By
Invitation
Internal
Auditing --Dr.
Larry E Rittenberg
The
internal auditing profession is undergoing a sea change in a
period where cases of corporate malfeasance are emerging at a
brisk pace. As the process of business is becoming complex the
internal auditors are expected to play more proactive role in
providing assurance services to corporates. Presently,
internal auditors are facing challenges relating to financial
reporting, understanding the business, approach to planning
audits, information technology security and control.
© IUP. All Rights Reserved.
Best
Practices
The
World of Sustainable Business Reporting
--Amit
C Kamath
Sustainable
Business Reporting goes beyond traditional financial reporting
by covering the economic, social and environmental aspects of
business. There is a growing trend of corporates embracing
sustainable business reporting. Most of the Indian corporates
are unaware of this aspect of business. The author strongly
advocates the introduction of sustainable business reporting
in business education in India.
© IUP. All Rights Reserved.
Governance
and Ethics
New
regulations: restoring trust in accounting and accountants --Paul
McDonald
The
corporate scandals at large in the United States shook the
confidence of investors in corporates and in the accounting
profession. It is a known fact that the problem lies in corporates
developing cozy relationships with their external auditors
that has ultimately resulted in dilution of the audit practices.
Long before happening of the Enron, a survey undertaken by
the Institute of Internal Auditors clearly showed the deep-rooted
`relationships' between the auditors and companies. The author
explores the results of a survey of CFOs conducted by his
firm in this regard wherein he concludes that the CFOs are
taking necessary steps to restore trust in corporate America.
©
Financial Executive international (www.fei.org). Reprinted
with permission.
Speech
SEC
Implementation of Sarbanes-Oxley: The New Corporate Governance
--Cynthia
A Glassman
Under
the Sarbanes-Oxley Act of 2002, the US Securities and Exchange
Commission was entrusted with formulating various rules and
regulations to effectively monitor corporates. The objective
is to restore investor trust in corporate America. Commissioner
Cynthia A Glassman in her speech before the National Economists
Club, talks about the need for good corporate governance and
requirement of an ethical corporate culture in this regard.
©
US Securities Exchange Commission (www.sec.gov). Reprinted
with permission. .
Accounting
Standards
When
measures match --Mohan
R Lavi
The
Indian Banking Industry is baffled with the issue of complying
with the Accounting Standards. The Institute of Chartered
Accountants of India is the authorized body to devise the
standards for Indian Corporates. Banks on the other hand present
their accounts under RBI guidelines. To minimize conflicts,
which is quite often resulting in auditors qualifying the
accounts of banks, efforts are on to blend the diverse accounting
practices.
© Business Line, April 17, 2003. Reprinted with permission
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