Financial and Accounting scandals
Top 8 ethical concerns:
- Gifts, gratuities, bribes (marketing and sales)
- Price discrimination and unfair pricing (marketing and sales)
- Dishonest advertising (marketing and sales)
- Miscellaneous unfair competitive practices
- Cheating customers, unfair credit practices, and overselling (marketing and sales)
- Price collusion by competitors or price fixing (marketing and sales)
- Dishonesty in making or keeping a contract
- Unfairness to employees and prejudice in hiring
- WorldCom filed for Chapter 11 bankruptcy
on July 21, 2002, only a month after its
auditor Arthur Andersen. By this time, the
company was indebted to its creditors by as
much as $7.7 billion. In its filing, the company
noted $107 billion in assets and $41 billion
worth of debt.
Fraud market:
- Fraud market is expected to grow to $82.5bn
by 2029
- There is a lot of AI utilised to identify fraud faster
What
are
financial scandals?
- Accounting scandals are business scandals which arise from intentional manipulation
of financial statements with the disclosure of financial misdeeds by trusted executives of
corporations or governments.
- Such misdeeds typically involve complex methods for misusing or misdirecting funds,
overstating revenues, understating expenses, overstating[1] the value of corporate assets,
or underreporting the existence of liabilities; these can be detected either manually, or by
the means of deep learning.[2]
, - It involves an employee, account, or corporation itself and is misleading to investors
and shareholders.
What are we talking about?
Is this a
scandal?
- In 2012,
Starbucks in the UK faced a public relations furor over its failure to pay British corporate
income taxes.
- While the tax avoidance practices Starbucks used were common among multinational
companies, Starbucks had been very public in its commitment to being socially responsible
and a good citizen of the communities in which it operated
- Starbucks pays just £5m UK corporation tax on £95m gross profit
- The company, heated criticism for paying very little tax in the UK, paid out £26.5m in
royalty payments
- The royalty payments helped Starbucks, which is run by the billionaire Howard
Schultz, make a global profit of $4.9bn (£3.7bn) in the same period.
- The UK division collected sales of £328m from its 1,000 UK stores in the year to 3
October 2021, up from £243m in the previous year when shops were temporarily closed
during the pandemic lockdown.
- Starbucks Coffee Company (UK) made a £95.1m “gross profit” for the year, but after
swallowing “administrative expenses” of £78m, its pre-tax profits were reduced to
£13.3m, on which it paid £5.4m tax.
- A year earlier the company received tax credits of £4.4m after recording a pre-tax loss
of £40.9m.
- Starbucks EMEA, which collects royalties from 43 countries including the UK, has built up
shareholder funds to more than $2tn.
- Starbucks Corporation, the US parent company, made an “operating income” profit of
$4.87bn in the year to 3 October 2021, on sales of $29bn.
Starbucks initial response to the UK protests – Back to 2012:
- Reuters published its “Special Report: How Starbucks avoids UK taxes” on October 15,
2012 (Bergin, 2012).
- The company responded quickly to the media attention, posting a statement on its website
entitled: “Starbucks Commitment to the UK” on October 17th (Engskov, 2012a)
Top 8 ethical concerns:
- Gifts, gratuities, bribes (marketing and sales)
- Price discrimination and unfair pricing (marketing and sales)
- Dishonest advertising (marketing and sales)
- Miscellaneous unfair competitive practices
- Cheating customers, unfair credit practices, and overselling (marketing and sales)
- Price collusion by competitors or price fixing (marketing and sales)
- Dishonesty in making or keeping a contract
- Unfairness to employees and prejudice in hiring
- WorldCom filed for Chapter 11 bankruptcy
on July 21, 2002, only a month after its
auditor Arthur Andersen. By this time, the
company was indebted to its creditors by as
much as $7.7 billion. In its filing, the company
noted $107 billion in assets and $41 billion
worth of debt.
Fraud market:
- Fraud market is expected to grow to $82.5bn
by 2029
- There is a lot of AI utilised to identify fraud faster
What
are
financial scandals?
- Accounting scandals are business scandals which arise from intentional manipulation
of financial statements with the disclosure of financial misdeeds by trusted executives of
corporations or governments.
- Such misdeeds typically involve complex methods for misusing or misdirecting funds,
overstating revenues, understating expenses, overstating[1] the value of corporate assets,
or underreporting the existence of liabilities; these can be detected either manually, or by
the means of deep learning.[2]
, - It involves an employee, account, or corporation itself and is misleading to investors
and shareholders.
What are we talking about?
Is this a
scandal?
- In 2012,
Starbucks in the UK faced a public relations furor over its failure to pay British corporate
income taxes.
- While the tax avoidance practices Starbucks used were common among multinational
companies, Starbucks had been very public in its commitment to being socially responsible
and a good citizen of the communities in which it operated
- Starbucks pays just £5m UK corporation tax on £95m gross profit
- The company, heated criticism for paying very little tax in the UK, paid out £26.5m in
royalty payments
- The royalty payments helped Starbucks, which is run by the billionaire Howard
Schultz, make a global profit of $4.9bn (£3.7bn) in the same period.
- The UK division collected sales of £328m from its 1,000 UK stores in the year to 3
October 2021, up from £243m in the previous year when shops were temporarily closed
during the pandemic lockdown.
- Starbucks Coffee Company (UK) made a £95.1m “gross profit” for the year, but after
swallowing “administrative expenses” of £78m, its pre-tax profits were reduced to
£13.3m, on which it paid £5.4m tax.
- A year earlier the company received tax credits of £4.4m after recording a pre-tax loss
of £40.9m.
- Starbucks EMEA, which collects royalties from 43 countries including the UK, has built up
shareholder funds to more than $2tn.
- Starbucks Corporation, the US parent company, made an “operating income” profit of
$4.87bn in the year to 3 October 2021, on sales of $29bn.
Starbucks initial response to the UK protests – Back to 2012:
- Reuters published its “Special Report: How Starbucks avoids UK taxes” on October 15,
2012 (Bergin, 2012).
- The company responded quickly to the media attention, posting a statement on its website
entitled: “Starbucks Commitment to the UK” on October 17th (Engskov, 2012a)
