Aldephia Corporate Collapse

...

has. This inconsistency is as a result of conscious intention to deceive the public, and also negligence on the part of the management.

• Integrity eradicates when corporate policies and procedures are replaced with individual or cumulative desires. This was found with the Rigas, for personal reasons, the did not care about corporate policies any more.

• Adelphia lack of integrity as the Rigas’ family uses Adelphia’s fund to : the Rigas family borrowed $3.1 billion from Adelphia to buy Adelphia shares without disclosing the loan, building a $13 million golf course, invested $130 million in the Buffalo Sabres hockey team.

• Finally, the Adelphia Family received special treatment: John Rigas gave his wife Doris, a $371,000 contract to decorate Adelphia buildings with$12.4 million in furniture from a Rigas family business(scribes.com).

2. Objectivity:- States that accounting entries and recordings are based on objective fact

• Adelphia Communications employees were ordered to create fraudulent sums of transactions by Timothy Rigas to fake profitable earnings.

3. Professional Behavior:- Company must avoid actions or omissions that may discredit the image of the profession.

• Adelphia scandal report shows that Rigas intentionally omitted evidences from the company’s consolidated financial statements and statement of financial position in order to hide their dubious act.

• According to the professional code of conduct, executives must refrain from using company profits for personal use, but the Risas used lots of company profits for personal use.

• Deloitte (the external auditor) have a duty of avoiding misleading accounts to the shareholders by giving unqualified report and should have avoided doing so because it is wrong.

• The auditor’s professional code of conduct expects that an auditor must be capable of detecting fraud no matter how it was committed from a company’s financial record. Therefore, going by the magnitude of the fraud at Adelphia, it will be expected of a professional audit team like Deloitte should be able to have detected the frauds and conspiracies done within the company.

4. Professional competence and Due care: The company requires professional diligence and appropriate

• Adelphia auditors did not exhibit Due professional care as it requires that the auditor should exercise professional skills in performing audit procedures and analyzing audit evidence. In exercising professionalism, the auditor should not settle for unproved persuasive evidence because they believe that the management is sincere.

From the above, it is clear that Adelphia defaulted in the basic fundamental principles guiding professional practices which also affects the accounting practice and as a result, it is true that Aldephia collapse was as a result of poor accounting practice because if they management were conscious about the professional behavior and competence, some of these frauds would have been detected before It escalated. So it is paramount to say that to a great extent, the collapse was as a result of defective accounting practice.

References

https://www.reference.com/government-politics/happened-adelphia-scandal-40a00b6679677497#

https://www.scribd.com/document/136050679/Adelphia

http://researchcommons.waikato.ac.nz/bitstream/handle/10289/1671/Accounting_wp_94.pdf?sequence=1

http://www.academia.edu/5223345/University_of_New_Hampshire_Scholars_Repository_An_Analysis_of_Fraud_Causes_Prevention_and_Notable_Cases_Recommended_Citation

https://pt.scribd.com/document/136050679/Adelphia

http://docslide.us/documents/adelphia.html