Window dressing: a popular pastime

Article Abstract:

Window dressing, i.e., the method of arranging a company's financial statements to give a misleading picture of the company's status, is becoming rather widespread, and is often difficult to detect. DTI inspectors have sometimes discovered such actions through their investigations. They have found several techniques that are commonly used. One is to enter a large transaction just before the end of the fiscal year. The practice may have begun in the financial industries and several examples were found there. London and Country borrowed short term at the end of the year thus increasing liquid funds from 14% to 48%. London Capital Group placed deposits over its own year end to increase total deposits and advances, while the Stonehouse companies replaced overdrafts with inter-company advances. Some insurance companies, including Vehicle and General Insurance were found to borrow money on the last day of the next year. In the non-financial sector the practice of improving balance sheets is also seen. Examples include Loneho, which manipulated figures involving interest in a Rhodesian company and John Willment Automobiles, a public company with 75% ownership by a private company, which engaged in elaborate loan arrangements between the two companies. While these various arrangements were designed to impress, other window dressing is meant to conceal, as in the case of Court Line where loans made to a shipbuilding subsidiary, Appledore, were concealed from project lenders by manipulation of funds. Window dressing is also sometimes used to conceal illegal loans to directors, and examples of this are given. Other techniques include the kiting of checks, which relies on the banks' clearing system, and is a common method in misleading statements. Other techniques are concerned with inappropriate report and the Cornhill report where accounting deceptions were discovered. DTI inspectors are obviously very concerned about these many deceptive methods and suggest that the accounting profession provide some guidelines to curb the practices.

Analysis, Investigations, Accountants, Business ethics, Auditors, Financial statements

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Keeping it all well inside the company

Article Abstract:

Organizations must implement inward-looking fraud protection schemes to reduce the risk of potential damage from cases wherein payroll staff may be implicated in corporate fraud. Components of such a scheme should include a security incident reporting system, an internal investigation unit to handle details of fraud incidents, senior-management efforts to reduce exposure to fraud and theft, a team to conduct regular reviews of the controls, and recruitment policies that will keep out potentially dishonest people. The exposure of a fraud case requires management to take a positive and pro-active position. This stand will allow the company to broaden its options for dealing with the perpetrators, limit the damages caused by the incident, and improve chances of recovering the resulting financial loss.

Cover Story, Fraud

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Just another pastime

Article Abstract:

high sheriff of South Yorkshire, Kim Staniforth

Staniforth, Kim

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