The Parmalat Scandal

Term Paper # 101947

Accounting
Business
Business > Accounting

This paper examines the accounting and auditing roles in the Italian Parmalat scandal.

1,025 words () | 4 sources | APA | 2008 United States

Paper Summary:

The paper discusses the Italian food conglomerate Parmalat's financial scandal that was one of the worst in world history. The paper looks at the combination of financial fraud and lax oversight and demonstrates what went wrong. The paper focuses on the auditor's role in this scandal and addresses what can be done to avoid such unethical activities in the future.

Outline:
What Went Wrong at Parmalat?
What Was the Auditor's Role?
What Can Be Done to Avoid Parmalat in the Future?

From the Paper:

"In December 2003, the Italian food conglomerate Parmalat crashed in a financial scandal that was one of the worst in world history (Citizen Works, 2006). Through a combination of financial fraud and lax oversight, the company had engaged in misstating income and hiding debt. In fact, the fraud was so extensive that almost 80% of the company's income for one sales year was fabricated of lies, and all of its profits were made up (Rogers, 2005). The scandal was particularly damaging to proponents of a principles-based reform of accounting, since it showed that such a system was just as prone to abuse and scandal as an alternate rules-based system. In fact, following the Enron and Worldcom scandals in the U.S., under the rules-based accounting system followed in the U.S., the Generally Accounted Accounting Principles (GAAP) had been reformed under Sarbanes-Oxley to bring the GAAP standards more in line with principles-based approaches (Rogers, 2005). The Parmalat scandal showed that these reforms ultimately may not work either if the accountants in a scandal are either collusive or neglectful to the point that scandal is possible by unethical persons."

Sample of Sources Used:

Carter, P., and Verardo, D. Technology changes the form and competence of audit evidence. The CPA Journal Online. Retrieved February 27, 2006, from http://www.nysscpa.org/cpajournal/2007/107/essentials/p68.htm.
Citizen Works. (2006). Parmalat scandal deepens: May be biggest fraud ever. www.citizenworks.org. Retrieved February 27, 2006, from http://unobserver.com/layout5.php?id=1327&blz=1.
Rogers, J. Going too far is worse than not going far enough: Principle-based accounting standards, international harmonization, and the European paradox. Houston Journal of International Law (January 1). Retrieved February 27, 2006, from http://209.85.165.104/search?q=cache:bJCaE50Nkvw:www.accessmylibrary.com/coms2/summary_0286.
Sverige, C. (2004). The Parmalat scandal: Europe's ten-billion euro black hole. www.wsws.org. Retrieved February 27, 2006 from http://wsws.org/articles/2004/jan2004/parm-j06.shtml.