Accounting Fraud, Business Failure and Creative Auditing: A Micro-Analysis of the Strange Case of Sunbeam Corp.

ABSTRACT

This paper puts under the magnifying glass the path to failure of Sunbeam Corp. and emphasizes the reasons of its singularity and exceptionality. This corporate case emerges as an outlier from the analysis of the US fraud cases mentioned by WebBRD: the consideration of the time between fraud disclosure and the final bankruptcy reveals the presence of an exceptional sampled case. In fact, the maximum value of this temporal variable is estimated equal to 840 days: it is really far from the range estimated by the survival function for the entire sample and it refers to Sunbeam Corp. Different hypotheses are evaluated in the paper, starting from the consideration of Sunbeam's history peculiarities: fraud duration, scapegoating and creative auditing represent the three main points of analysis. Starting from a micro-analysis of this case that the SEC investigated in depth and this work describes in detail, inputs for future research are then provided about more general problems concerning auditing and accounting fraud.

Keywords: accounting fraud, failure path, creative auditing, historical micro-analysis



Source : Agostini, Marisa and Favero, Giovanni, Accounting Fraud, Business Failure and Creative Auditing: A Micro-Analysis of the Strange Case of Sunbeam Corp. (September 20, 2012). Department of Management, Università Ca' Foscari Venezia Working Paper No. 12/2012. Available at SSRN: http://ssrn.com/abstract=2149552