Phar-Mor Inc Fraud

Phar-Mor Inc., Waste Management, and WorldCom Frauds

In the fraud case of Phar-Mor Inc., Waste Management, and WorldCom, the auditors not only failed to discover these companies fraudulent financial reporting but some even help in guidance to continue fraud schemes. Andersen Accounting helps Waste Management in their fraudulent activities by issuing unqualified audit reports of the company’s false financial statements, and engaged in a secret agreement to write-off error of data over the periods of up to ten years and to change accounting practices. Andersen Accounting certified WorldCom’s false financial data of capitalized expenses and false account receivables of $11 billion was all in accordance with GAAP rules. Coopers & Lybrand fails

It was a multiyear false financial reporting committed by the founder and five other former top officers. These defendants “cooked the books”. They committed these frauds for personal gains driven by their greed and wanting to maintain their top-level positions. Company’s revenues wasn’t meeting the targets, so the defendants manipulated financial data by deferring current period expenses and inflating the current period earnings. To continue on these fraud schemes, they engaged themselves in multiple improper accounting practices. The fraudulent activities includes avoiding depreciation expense on garbage trucks by inflating salvage values and extended useful lives not set as industry standards, reporting false salvage values on other assets, ignore recording necessary write off of costs of abandoned landfill development projects, failed to decrease the value of landfills when it is use to fill waste, inflated revenue so top officers can earn large amounts of compensation in bonuses, inflated reserves account so that the excess can be used to avoid reporting unrelated expenses, and failed to set up an reserves account to pay for incomes taxes. The founder and five other former top officer are charged for using accounting manipulation known as “netting” and “geography” to make the financial looks better. The netting was use to falsify financial data of $490 million of current period operating expenses and offsetting prior period accounting to unrelated one-time gains on sale or exchange of assets. The geography entries was used to move millions of dollars between line items on the income statement to make the financial look