Fraud

Fraud

There is an opportunity for fraud whenever one person or one entity controls a
situation.

For example, when a corporation appoints one person to the offices of Chairman of
the Board, President, and Chief Executive Officer.

Or when the Board of Directors has the power to hire—and fire—its certified public
accounting firm, there is the opportunity for collusion.

Fraud in accounting is called “creative accounting”.

Fraud is also committed by the securities rating firms Standard and Poors and Moody’
s Investor Service  when they rate issues.

They are paid by the issuers for their services. As reported by the New York Times
October 23, 2008, this conflict of interest was admitted   by these firms when Moody’s
said “the agencies’ interests can eclipse those of investors…in my opinion the business
model prevented analysts from putting investor interests first”, and Standard and Poor’s
said “Profits were running the show”.

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