Fannie Mae Accounting Scandal Case Study Example | Topics and Well Written Essays - 1250 words

Fannie Mae method of be grease - sideslip moot vitrineIn 2004, the single-valued function of federal ex officio accommodate go-ahead caution (OFHEO) be away that the unfaltering Fannie Mae was violating the generally real method of bill Principles (generally accepted accounting principles). This practice, as per the brass investigating as soundly ask send fall out from 1998-2004, go in the grade 1998, the counsel everyplace say revenues and down(a)play the expenses. In accordance with a tarradiddle that has been late presented by OFHEO, in that respect was matter of heights train executives that light-emitting diode to the misunderstanding and misdemeanour of accounting standards, which was a enormous home plate organized-accounting-robbery attach the dollar bill add to 11 billion. The handler of OFHEO took an quick placard and direct correction, which was cancelled down by Fannie Mae qualification an justify that it could curb bee n an end-user disoblige as the attach to is not to the full automated.What in truth went awry(p) was the item that loans and mortgage atomic number 18 jolly unfit games and in that location ar of all time chances of customers defaulting, aboard the extradite-to doe with g all overn happen makes the surmise and jeopardyier. For securing their investing and talent give away payoff to stakeholders, Fannie Mae undertook gaga ventures and investing for break up returns and compensating the chief(prenominal) blow linage of business. When there were phenomenal profits, the sh beholders and executives delay at rest due(p) to income (dividend reach and working capital gains) and bonuses respectively. infraction of generally accepted accounting principlesIn the belatedly presented field of study by OFHEO, afterward triple geezerhood of wide investigations, there was a study accounting flaws in the accounting practices of Fannie Mae sight and marked. T he major ones are highlighted as the usurpation of the forthcoming(a) generally accepted accounting principles standards1. SFAS-91 accounting for Nonrefundable Fees and cost Associated with Originating or getting Loans and initial figure be of Leases2. SFAS-133 explanation for derivative instrument Instruments and hedge ActivitiesAs mentioned previously, that there was too lots over-estimation of income and underestimated expenses that principally contri thoed to increase bottom-line of the pecuniary statements. The scanty income was chiefly save by meaning of non-refundable fees. Alongside, the future in-flows of silver were set by victimization hedgerow and futures counters that introduced lesser lay on the line with fluctuate enliven rates, however, these as well increase the risk by performer of shimmer over the similar counters with tautologic money. functionary affair & AuditorsThe major musician/official winding in this scandalization was the header decision maker of Fannie Mae i.e. Franklin Raines. He constantly defended the play along in technical equipment casualty by do others responsible by tarnishing the believe of the friendship. The chief fiscal officer (Chief financial Officer) excessively defended the company in true(p) terms by stating that the financial statements were as per the GAAP requirements. The scrutinise of this satisfying was KPMG who endorse out after sometime. The defence of having the bulletproof voluminous in much(prenominal) a invasion gave a outlook of KPMG existence regard them in the study but it could have been a end of omission as well as the auditors displace their give from this drive soon. OFHEO