Accounting & Financial Analysis News by GLG Council Members

Ten Reasons Frauds Occur

August 4, 2009

Analysis by: GLG Expert Contributor

Analysis of:SFO adopts aggressive approach on banking fraud | business.timesonline.co.uk

My advice is, if you think that a fraud may be happening then fear the worst; because it probably is.

Codes of Conduct, the Ethical Principles of Companies

August 3, 2009

Analysis by: GLG Expert Contributor

Analysis of:Taking Care of Business: Corporate Codes of Conduct as Global Regulation | www.allacademic.com

There may be those in boardrooms, around the corporate world, who feel that implementing such a code is an unnecessary waste of time and money. I would like to draw their attention to three key reasons, which I suggest they repeat to themselves every night before going to bed, for having the code: 1. Reputation 2. Reputation 3. Reputation

Stressed Value-at-Risk To Be Required by the Revised Basel II Capital Framework

August 1, 2009

Analysis by: GLG Expert Contributor

Analysis of:Basel II capital framework enhancements announced by the Basel Committee | www.bis.org

The global economic crisis of 2007-8 and the resulting unexpected massive losses suffered by financial institutions prove that standard Value-at-Risk (VaR) calculations seriously underestimate true market risk. In an attempt to address the shortcomings of the current VaR methodology, the Basel II Committee on Banking Supervision approved a package of amendments on July 9, 2009 that includes a new requirement for stressed VaR calculations, to be implemented no later than 12/31/2010.

Why We Don't Need a Value Added Tax

July 30, 2009

Analysis by: GLG Expert Contributor

Analysis of:A VAT Tax Is Not the Answer | www.realclearmarkets.com

Congress is looking for ways to pay for health care and to reduce the deficit, and some in Washington are proposing a value-added tax. This is inadvisable. A 1% VAT could raise $100 billion a year, and a 5% VAT could bring in $500 billion. This would encourage Congress to increase spending rather than reducing it, raising the percent of GDP attributable to the government sector. European countries with VATs generally have slower growth and higher unemployment than does the United States.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Accounting Disclosures - FASB Moves - My Comments

July 29, 2009

Analysis of:FASB Initiates "Disclosure Framework" Project Aimed at More Useful, Organized and Consitent Disclosures | www.fasb.org

 The referred FASB news release speaks of a new FASB project to simplify accounting disclosures and make them more meaningful. In this analysis I look at the relevance of such a major project in the realm of accounting and how this could make financial statements more meaningful.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Serious Frauds and Internal Controls - A Look at Emerging Practices

July 23, 2009

Analysis of:Allegations of massive fraud in the gulf: A $10 billion Saudi Fraud Claim | www.economist.com

Surplus investment cash is always a problem. Loose internal controls and financial practices compound the problem. In the referred article there is an extensive discussion of  how a large and respected Saudi conglomerate defaulted on financial commitments on account of  frauds and lapses perpetrated ostensibly by a family member. In this analysis I look at why and how control practices are and will have to change in response to changing circumstances.

How Stock Option Backdating Can Be Detected

July 21, 2009

Analysis by: GLG Expert Contributor

Analysis of:PCAOB Alerts Auditors on Backdating | www.cfo.com

We develop a straightforward method to find manipulation by corporate insiders of stock option award or exercise dates.  We test the method against disclosed backdating companies and find the method to be extremely reliable.  The study can be downloaded at the following link: .   

Nitish GroverPrincipal, OwnerNitish Grover and Associates

A Season for Fraud - Possible Effect on Audit Quality and Audit Standards

July 15, 2009

Analysis of:Lawyer Sentenced to 20 Years in $700 Million Fraud | www.nytimes.com

As I read the referred article about a lawyer who was at the top of his profession being sentenced to 20 years for fraud and of other cases like Madoff et. all (including the cases over the last ten years) I  think this is the season for frauds. Major frauds are being announced and uncovered in innovative ways including in two major cases by public announcement (Madoff and Satyam). In this analysis I take a look at how this "season for fraud" is going to impact audit quality, audit standards and also forensic accounting.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Charles Darwin, Adam Smith, Accounting and Financial Rules

July 13, 2009

Analysis of:The Invisible Hand, Trumped by Darwin | www.nytimes.com

The referred article speaks of Adam Smith and Charles Darwin. While Smith spoke of the invisible hand, Darwin spoke of natural selection and survival of the fittest. The referred article is in terms of economics. I look at the same question from an accounting and financial emphasis.

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Fair Value - The Continuing Debate - Why it Never Ends?

July 8, 2009

Analysis of:The Fair Value Deadbeat Debate Returns | www.cfo.com

The referred article speaks of fair value and its impact on credit rating. Fair value is related to a number of  instruments including derivatives, hedging and plain vanilla instruments. I was recently at a conference in Agra, India where the Chairman of the IASB Sir David Tweedy mentioned IAS 39 in passing and said that the IASB was still trying to get to grips with its intricacies. In this analysis I look at why fair value will continue to confuse but is essentially the light in the right direction for understanding corporate financial reports.

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