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LanghamP_ t1_je2lu0s wrote

I feel that companies that are about to IPO are almost certainly fraudulent. You look at Jack Dorsey and Square, with maybe 40% of those user accounts being fraudulent, and stock being sold to little Reddit could it not be fraudulent? It's almost as if IPO's are now being used to enrich original stockholders who sell and exit instead of raising capital.


ryathal t1_je37t6v wrote

IPO has been about paydays for owners for a very long time.


AthKaElGal t1_je3qtgp wrote

IPOs are big pile of turds - Buffet and Munger


agm1984 t1_je5gc8n wrote

Earnings Before I Tricked Dumb Auditors (EBITDA)


jonathanrdt t1_je4t6gw wrote

The investment banks are the real winners. They get paid to structure the transaction and on the gains. They are incentivized to hype and mislead.


LastResortFriend t1_je3j4ht wrote

Oh well, I'm sure after 2008 we learned and applied lessons to our stock market. Nothing to see here.


Test19s t1_je4ob5k wrote

World debt is several times GDP, and that increased fast between 2008 and the COVID stimuli.


knightopusdei t1_je3judz wrote

Or two just summarize everything you just said ..... investors just treat the stock market like a gambling casino


MrMitchWeaver t1_je3l6sz wrote

You're thinking of speculators. Investors are those who invest in businesses for the long term, not trying to make a quick buck.


Ok_Skill_1195 t1_je35hdu wrote

It's almost like if you don't enforce the rules, people stop following them


BabyNapsDaddyGames t1_je5h23s wrote

It's a bit more detailed than that, corporations having been bribing (read: lobbying) politicians for decades to erode those laws that would keep them in check. The IRS has been gutted so many times they no longer have the power to pressure the wealthy. For a business to become successful without using all the loopholes is very difficult unless the stars are aligned in the right way.


mandyama t1_je23xnv wrote

Wonder what r/accounting thinks about this?


KAKOW_ t1_je67c25 wrote

I can tell you that the regulations and amount of work increases, but the pay stagnated. This has trickled down to fewer accounting grads entering public accounting to audit these companies. At the same time, the number of accounting grads has declined as other careers like data science have become more attractive and intellectually challenging for students. The AICPA is trying to change the CPA format to attract more candidates, but I see that as a stalling tactic instead of addressing the true cause for the drop in new accounting grads.


mandyama t1_je6bdt6 wrote

Very true! PA is grueling, at least from what I understand. Incredibly long hours with pay that’s unacceptable is not a formula for a strong workforce or one that’s going to weed out this type of fraud. Excellent take.


TheGinger_Ninja0 t1_je6xadu wrote

This accountant is unsurprised.

Ever since citizens united, corporations and rich people became king of the land.

They're not super fond of regulations, enforcement, and taxes


JoeDyrt57 t1_je33qpf wrote

When the country as a whole elects as their top leader a very well-known con man, cheat, liar, misogynist, blowhard narcissist, then cheers as he lies and bullies everyone for 4 years, it is no surprise that those same people think lying and cheating are OK behaviours. <shrug>


marketrent OP t1_je1vs1u wrote

Excerpt from the linked summary^1 about an aggregate measure of financial misreporting:^2

>False information on balance sheets has “real economic effects because it represents misinformation on which firms base their investment, hiring, and production decisions,” Dr. Beneish and his co-authors—David Farber of Indiana University-Purdue University in Indianapolis and Matthew Glendening and Kenneth Shaw, both of the University of Missouri—wrote in December.

>Messod D. Beneish, a professor of accounting at Indiana University who developed the M-Score in the 1990s, and several co-authors have calculated an aggregate score for nearly 2,000 companies.

>The M-Score is calculated from eight ratios on a company’s balance sheet, all numbers that public companies report quarterly, and comparing the ratios to earnings statements from a year earlier.

>The “M” is for manipulation, and uses a company’s financial statements to determine whether it is engaging in manipulation.

>“We think this is a measure of misinformation in the economy,” said Dr. Beneish. The new aggregate measure was published in a December paper, and the latest data—compiled in March and shared with The Wall Street Journal—shows that the collective probability of fraud across major companies is the highest in over 40 years.


>There are ways for companies to manipulate all these metrics to appear profitable even when actual sales aren’t improving.

>For example, one of the eight metrics raises a flag if a company abruptly starts reporting more “receivables,” that is, more money owed to the firm but not yet paid.

>Another flag goes up if a company reports higher values of assets that cannot be sold, and that aren’t clearly identified as plants, property or equipment.

>A third metric looks at changes in accruals, which is when an expense has been incurred, but not yet paid. Another identifies whether companies change how much depreciation they take.

>Dr. Lee, now a professor at the University of Washington in Seattle, says that any of the eight metrics wouldn’t necessarily mean trouble.

>But when the score of the combined metrics is rising, it shows “a growth company, with core businesses that are eroding, that is running out of economic steam and using aggressive accounting,” he said. Even if the accounting is legitimate, he added, “you may want to avoid that company.”

^1 Josh Zumbrun for the Wall Street Journal/News Corp, 24 Mar. 2023,

^2 Messod D. Beneish, David B. Farber, Matthew Glendening, and Kenneth W. Shaw. Aggregate financial misreporting and the predictability of U.S. recessions and GDP growth. The Accounting Review (1 Dec. 2022)


lost_in_life_34 t1_je266tu wrote

the receivables thing is pretty old. back in the 90's a bunch of companies were selling a lot of stuff to the dot coms and other startups on credit and lost big when they went under and then when all that gear was resold on ebay and chapter 7 auctions


Im_Talking t1_je2ckaz wrote

Seems correlated to the rise in national debt.


TheGinger_Ninja0 t1_je6ycy2 wrote

Eh. The national debt rise is pretty easy to pinpoint causality too. A huge portion is rich people getting a big ol tax break from trump and the GOP.

So it's kind of related, in that rich people set themselves some rules that favor them in both cases. But financial misrepresentation isn't exactly causing a defect.

Sure doesn't help though.


StickyChief t1_je2a54i wrote

My finance professors told me this for years


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IamMrBucknasty t1_je5hkrb wrote

This needs to move up in the front page!


1ndomitablespirit t1_je5x2gg wrote

It's almost like both political parties are in collusion to only help companies and the rich. The US government believes that corporations are people, and people are entitled parasites.


FormerTimeTraveller t1_je64v4n wrote

I’ve seen this in practice at a number of companies. I’m honestly not even so worried about the public companies, it’s the private ones that really spook me.

It’s so unbelievably easy to lie with accounting if you aren’t obsessive about making everything fit together correctly. And I honestly don’t think most small company controllers out there know where to start.

20% haircut on inventory and fixed assets doesn’t even begin to fix what I’ve seen out there.