BUS431Final - 1) A) The Baptist Foundation of Arizona (BFA)...

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1) A) The Baptist Foundation of Arizona (BFA) was created as a non-profit organization in order to raise money in support for Southern Baptist causes and issues. In the 1980’s, they shifted their strategy and began to invest in the real estate market and sell IRA-like retirement investment plans to its church members. Like many other fraudulent activities in other companies we have seen, their management was motivated to show positive results and not post losses. When the industry dropped in the late 80’s, and to cover up their problems they created independent separate corporations which helped disguise their problems and led to a Ponzi- scheme like situation where new investor money was paying off interest on old debt accumulated. They like so many other companies that committed fraud, had accounting deficiencies as well with in adequate disclosure of information and obviously an auditor that may have been involved with some of the fraud that had been occurring. (Arthur Andersen was their auditor, whom we have discussed many times before with being involved with companies like Enron and WorldCom and their fraud-related activities as well). B) Again, as we have seen with many other companies that faced fraud, the internal controls at BFA were either virtually non existent or, at least, were not being implemented to the degree they needed to be in order to keep the company from hurting itself. The company was masking
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information and data by creating other instances where it could hide what was really going on. This was being accomplished higher executives (as was the case in many other companies with similar fraud issues). There was not enough regulation on the executives’ power and decision making to prevent them from taking actions that would be unethical or illegal. Had the company had better and “proper” internal controls being implemented, they could have had a better “checks and balances” in their company to be sure that power wasn’t being abused as it eventually was at the BFA. C) The Independent Accounting Firm Arthur Andersen, as they had shown at both Enron and WorldCom, had massive shortcomings in relation to the work they did with these companies and in the BFA case as well. AA was not following the GAAP, and because they were not following this standard the allowed themselves to be susceptible and culpable to the eventual fraud that was discovered at BFA. AA was also certifying BFA’s books during the periods of their fraud and, although they never admitted guilt or not, still proved to be a part of the problem by being either ignorant to the issues at hand or playing a larger role in helping the cover-up. D)
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This note was uploaded on 07/12/2011 for the course BUS 101 taught by Professor Noname during the Spring '11 term at Albany State University.

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BUS431Final - 1) A) The Baptist Foundation of Arizona (BFA)...

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