Case Study Week 3 - 1. Identify an accounting scandal at a...

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1. Identify an accounting scandal at a corporation that has resulted in a loss of reputation to the accounting profession. Explain the crime(s) committed. In early 2008 Lehman borrowed large amounts to fund its investing in the years leading to its bankruptcy in 2008, “a process known as leveraging or gearing”. A large part of their investments were towards housing market, making it vulnerable to a downturn in that market. This firm generated large profits during the housing boom, this place them in a vulnerable position; once a loss 3-4% of its value of it would diminish its book value or even equity. Furthermore, Investment banks are not subjected to the same regulations applied to banks to restrict their risk-taking. The 1 st sign of trouble for Lehman was in of August 2007; the firm closed its subprime lender , BNC Mortgage, the cut 1,200 positions in 23 different locations, “and took a $25-million after-tax charge and a $27-million reduction in goodwill ” . Now where the eye brows were raised was in March of 2010, a
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This note was uploaded on 01/29/2012 for the course ACCOUNTING 574 taught by Professor Unknown during the Spring '11 term at Keller Graduate School of Management.

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Case Study Week 3 - 1. Identify an accounting scandal at a...

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