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Parmalat Fraud

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by

Kristine B

on 4 January 2013

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Transcript of Parmalat Fraud

Parmalat Fraud Assignment By: Kristine & Bhakti Overview Time Line of Scandal Scandal Methodology How did the firm hide the fraud? Who did the scandal effect? How to avoid Fraud Citations Italian Food giant-specializes in dairy products
Founded in 1961 by Calisto Tanzi
Started off as a small family business
Main headquarters in Parma, Italy Parmalat specializes in Milk, yogurt, cheese, butter, ice cream 1990- Listed on Hilan stock exchange, Parmalat starts to sell more items
1999- Company sets an off shore subsidary ledger in Cayman Islands
2003- The company's shares are hammered amid questions regarding transactions with the Epicurum fund in the Cayman Islands.
2003-Bank of America claims a document showing 3.9bn euros in off-shore affiliate Bonlat's bank account is forged.
2003- Parmalat shares hit their lowest level, losing 97% of their value, and are suspended. The company is valued at just under 90m euros ($100m, £60m).
2004- Bank of America says it can find no trace of an account which a creditors' group had said contained about 7bn euros.
2004- Auditors determine that as of September 2003 Parmalat had debts of 14.3bn euros, almost eight times what management had claimed at the time.
2005- Prosecutors charge 16 people, including Calisto Tanzi, over their roles in the collapse of Parmalat. The scandal affected the company, and everyone included in the company

Former employees arrested
Owner, Mr.Tanzi's kids, arrested
American Investors lost money http://investing.money.msn.com/investments/financial-statements?symbol=IT%3aPLT
http://news.bbc.co.uk/2/hi/business/3369079.stm
http://www.cliffsnotes.com/study_guide/Internal-Control.topicArticleId-21081,articleId-21006.html
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8192554/Parmalat-chief-Calisto-Tanzi-sentenced-to-18-years-in-jail-over-11.7bn-collapse.html
http://www.accountingcoach.com/online-accounting-course/09Xpg01.html Parmalat moved some of its debt off the company's financial statements (explain)
Parmalat used a sysem of double billing to Italian supermarkets, which created the impression that its accounts receivable was much larger than it really was.
The bank confirmation for 3.9 billion euro was forged by an employee.
The employee scanned the bank logo and bank employee's signature using a data processor, printed the document then copying and faxing it many times to make sure there was no mistakes. Later faxing the final version to the auditors. Forged Parmalat Bank Confirmation Calisto Tanzi Enforce Internal Controls 1. Proper Authorization
2. Segregation of Duties
3. Adequate documents and records
4. Physical Control Generally Accepted Accounting Principles Violated Economic Entity Assumption
CEO of company stole money and placed it into side business
The CEO placed money into Parmatour, which was a tourism agency, and Parma which is a soccer club What to do next time Independent directors
Company should change auditors every 5 years
Full transcript