Competency, Trustworthiness of Ratings, and Conflicts of Interest Credit rating agencies have not been held accountable for their ratings. Meaning, an inaccurate rating brings no repercussion to these agencies. If one is not held accountable for their actions, logically there is less incentive to perform well or even at a high standard. These agencies knew their services were needed under...
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What is a Credit Rating Agency and What Task Does it Perform? Since 1931, the United States government has encouraged or even required certain types of investors to use financial instruments or securities that have been rated high by rating agencies (15 Chap. L. Rev. 139). These agencies use available financial data, economic conditions, and various other factors to determine the strength of a...
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This is the fourth part in my series discussing corporate fraud. For more on this topic please read
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However, financial statement manipulation is simply on the edge of the fraud landscape. Much more common are asset misappropriations. The three basic types of asset misappropriations are skimming, larceny and fraudulent disbursements. Skimming and larceny occur when cash is taken directly from the employer, the difference between the two being that skimming occurs before the cash has a chance to...
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I next want to discuss the history of the governmental response and the more noteworthy commentary on corporate culture in the last thirty years. Although measures to prevent corporate crime were in effect before the 1980s, one of the more sufficient events was the formation of COSO in 1985. COSO is the Committee of Sponsoring Organizations, a volunteer group formed by the major accounting,...
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Corporate fraud has always been one of the scourges of civilized society, although in the past decade we have witnessed unprecedented levels of greed in corporate culture. The past decade has been marred by Enron, WorldCom, Adelphia and many others, as fraud shrinks our economy by approximately six percent. Watchful eyes cannot be everywhere at all times, but often the problem is that the...
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There are categories of business entities responsible for paying shareholder-employee reasonable compensation. An S Corporation[1] is one such corporation. An S Corporation is defined as a type of corporation that elects to be taxed under a section of the U.S. Internal Revenue Code. “S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee...
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General unsecured claims and penalty claims refer to those taxes that do not receive priority tax claim status. These types of claims are not entitled to secured, administrative tax claim (Armknecht). They do not qualify for priority tax claim status because of the nature of the claims; they are, in fact, old claims.
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Priority tax claims, as referenced in 11 U.S.C. 507(a)(8), include the following categories:
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Secured claims are defined as those claims secured by a lien on the debtor’s property. The claim can only be secured “to the extent of the value of the property securing the claim. For example, a claim for $40,000 secured by a piece of property worth $10,000 would be a secured claim of $10,000 and either a priority tax claim or a general unsecured claim of $30,000” (Armknecht). When it is...
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