INSEAD Library

Includes index

Digitized

Business Fairy Tales Grim Realities of Fictitious Financial Reporting Table of Contents Acknowledgments 1 Gold Dust: Introduction to the Problem of Fictitious Financial Reporting Table 1.1 The Top Twenty Methods of Fictitious Financial Reporting y 1 8 2 The Sizzling Saga of Sunbeam Part 1: The History of Sunbeam Part 2: The History of Al Dunlap Part 3: Dunlap's Carrot-and-Stick Approach Part 4: An Overview of Sunbeam's Fictitious Financial Reporting Schemes Part 5: The Sunbeam Inferno Part 6: Signals of Sunbeam's Schemes 10 10 12 19 24 31 37 3 Hocus Pocus Sensormatic: Madness at Midnight Xerox: Not to be Copied CUC/Cendant: Phony Funds Insignia: Return to Sender 46 47 52 56 60 4 WorldCom Wizardry: From WorldCom to World-Con Part 1: The Wizards ofWorldcom Part 2: The Acquisitions Spree Part 3: Problems in Wizard World Part 4: An Overview ofWorldCom's Fictitious Financial Reporting Schemes Part 5: The Collapse of Wizard World Part 6: The Gatekeepers Who Failed WorldCom Part 7: Signals of the WorldCom Fraud 65 65 72 81 85 89 94 99 5 Abracadabra Livent: Phantom of the Finances Rite Aid: "The Keys to the Kingdom" Allegheny (AHERF): Trick or Treatment? Lockheed: Sky High 108 108 117 122 125 6 Enron and the Tale of the Golden Goose Part 1: Hatching the Goose: The Start of Enron Part 2: Fattening the Goose: Enron Capital and Trade (ECT) Part 3: Plucking the Goose: How Enron Lost Its Gold 131 131 143 145 iv TABLE OF CONTENTS Part 4: Stuffing the Goose: The Electricity Fiasco in California Part 5: How Enron Cooked the Books: The Main Fictitious Financial Reporting Schemes Part 6: Signals of the Enron Fraud: Indications That Enron was a Cooked Goose 156 161 184 7 Tall Tales The Edison Lesson The Adelphia Account The BellSouth Warning 'Crispy Kreme and the Missing Dough 203 203 207 213 215 8 The Pension-Fund Fantasy Part 1: The Disappearing Pension Part 2: The Alchemy of Pension Accounting 23 2 223 227 9 Reform: Is There a Magic Potion? Part 1: Introduction Part 2: Corporate Governance Reform Since 2002 Part 3: Emerging Reform Issues Table 9.2 The Top Twenty-Five Signals Indicating Possible Fictitious Reporting in Financial Statements 21 3 231 234 244 249 Epilogue The True Philosopher's Stone: Making Ethical Decisions in the Business World Accounting Abbreviations Index 256 271 273