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Transcript of Nortel Scandal
What happened to the perpetrators of the scandal
They were arrested and put on trial, they were being charged with criminal fraud. After a year they were found not guilty. They were fired from the company before the trial even started. Frank Dunn, Douglas Beatty, and Michael Gollogy were arrested again in 2008 and put on trial, in 2013 they were let go on bail and found not guilty.
How did this scandal change the business environment, or the accounting profession?
Nortel changed its auditors to Kpmg lpp in 2007, they also changed their rules and set new penalties for breaking them. The Canadian institute of Chartered Accountants(CICA) updated its accounting handbook.
How did the scandal affect the company and investors?
Nortels reputation was hurt pretty badly by this scandal, investors were pulling out of the company. New investors would see this and not want to place their money in an insecure company. And at this time Norel was having money troubles after a big technological from years previous.
How was the scandal discovered?
Finances were being recorded incorrectly and were being released in the wrong time periods. The financial statements and records were puposely lied about. The finances were lied about and made to show that the company was doing good, in order to hide the loss of money. In case you didn't know lieing about the financial statements of a company goes against the rules of accounting. You cannot understate or overstate the company's value.
How did the scandal contravene ethical decision making criteria
This went against the ethical decision making in many different ways such as taking advantage of the other employees at Nortel, using them to get to the things they need. They went against gaaps like full disclosure, the priciples of conservatism, the time period concept, the objectivity principle, and the consistency principle. It goes against all the things taught in school, that you should not steal from others or make decisions based on your own greed. These people made the opposite of good ethical decisions. Their decisions afffected the rest of the accountants in the company and elsewhere by harming the title of accountants.
Who was involved
All of the people involved in the scheme included Frank A. Dunn, Douglas C. Beatty, and Michael J. Gollogy. Frank Dunn joined Nortel in 1976 and was chosen as Nortel’s CEO in November of 2001. Douglas Beatty was a chartered accountant who joined Nortel in 1985 whereas Michael Gollogy was a controller for Nortel and had been since 1996. Along with a few other employees.
1.What was the scandal?
2.Who was involved?
3.How did the scandal contravene ethical decision making criteria?
4.How was the scandal discovered?
5.How did the scandal affect the company and investors?
6.What happened to the perpertrators of the scandal?
7.How did this scandal change the business environment, or the accounting profession?
What was the Nortel Scandal
The Nortel scandal was a long chain of events that happened in the early 2000’s, mainly between January of 2002 and June 2003. Nortel was handling the excess fees earned by paying out unusually large amounts of money as “bonuses” to other employees. Two of the main people who were involved, Frank A. Dunn and Douglas C Beatty, were trying to cover up the fraud by saying that the companies restatement was from internal errors in the server. And from the reconstruction of the company after a technological collapse.