Essay on Case Study Analysis of Royal Ahold Scandal

7047 Words Sep 30th, 2008 29 Pages
Final exam assignment

Over the last few decades there have been a number of cases of high profile corporate collapses and fraud scandals. In essence, the unethical behaviour of corporations affects us all, such as shareholders’ lost financial investments, employees who lost their jobs, other companies that provided goods and services to the company, as well as the economic impact on domestic and international communities. In this paper I will focus on the case study of Royal Ahold and the large accounting fraud that took place within the company. The issues I will address include Ahold’s transparency and disclosure weaknesses, its demanding culture focused on economic growth regardless of certain ethical principles, the
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They coaxed suppliers to confirm their false promotional allowances, by threatening them through their powerful market dominance . They furthermore manipulated their accounting entries by for example incorporating discounts into the accounts before the actual sale was made or into the wrong time period. Forged cash receipts were also made along with misleading and false statements to the company’s independent auditor, Deloitte.
Another of Ahold’s fraudulent activities that was made possible due to false disclosure and lack of transparency is its alleged consolidation with several joint ventures. Ahold claimed to have effective control over numerous joint ventures, in cases where it owned only 50% of the shares. This was also done despite shareholders agreements that provided joint control for Ahold and its joint ventures. They were able to claim this by providing ‘control letters’ which was signed by the top executives of these joint ventures, this would then be followed by the immediate rescinding of these letters. Once again, this was done by Ahold in order to consolidate their revenues and earnings from their subsidiaries.
Both the accounting irregularities exhibited by Ahold, as well as the fraudulent activities in the alleged joint ventures, is examples of managements interests not being aligned with that of the shareholders. Managers acted in an opportunistic manner, when they saw a way to cover the shortfalls in their budgeted earnings. They did not take

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