annual reports. the annual report a communications vehicle a sophisticated marketing tool used to...
TRANSCRIPT
Annual Reports
The Annual Report
A communications vehicle
A sophisticated marketing tool
Used to impart a particular organizational image
The Annual Report
Anthony Hopwood, an accounting professor and researcher asserts that the corporate annual report is a largely unresearched document, subject to little systematic investigation.
The Annual Report
He argues that it has become a highly sophisticated product of the corporate design environment, the main purpose of which is to proactively construct a particular visibility and meaning rather than revealing “what was there.”
2002 Report to the Nation
Occupational Fraud and Abuse Association of Certified Fraud Examiners
Occupational Fraud
“The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.”
Association of Certified Fraud Examiners 2002 Report to the Nation
Occupational Fraud
Occupational fraud schemes can be
as simple as pilferage of company supplies or
as complex as sophisticated financial statement frauds.
Association of Certified Fraud Examiners 2002 Report to the Nation
Occupational Fraud
All have four elements:
1. Is clandestine
2. Violates the perpetrator’s fiduciary duties to the victim organization
3. Is committed for the purpose of direct or indirect financial benefit to the perpetrator.
Association of Certified Fraud Examiners 2002 Report to the Nation
Occupational Fraud
4. Costs the employing organization assets, revenue, or reserves.
Association of Certified Fraud Examiners 2002 Report to the Nation
Occupational Fraud
Study covers 663 occupational fraud cases that caused over $7 billion in losses.
An estimate of 6% of revenues will be lost in 2002 to occupational fraud.
Occupational Fraud
Categories of Fraud
Misappropriation of assets
Account for 80% of frauds
Cash is the targeted asset 90$ of the time.
Corruption Schemes
Account for 13% of frauds
Cause over $500,000 in losses on average.
Categories of Fraud
Fraudulent statements
The most costly form of occupational fraud
Median losses of $4.25 million per scheme
Methods of Fraud
Duration of Fraud
Position of Perpetrator
Gender of Perpetrator
How did they succeed?
Insufficient controls (49.2%)
Controls ignored (39.9%)
Couldn’t have been prevented (10.8%)
None of the above (3.1%)
Now . . . Back to Annual Reports
First . . . What are they? Why do we need them?
What are they?
It depends somewhat on how you define “annual report!”
Annual report to SEC (Form 10-K)
Annual report to shareholders
Annual Report to the SEC
Form 10-K
Form 10-K . . .
Who must file?
Companies with more than $10 million in assets
Whose securities are held by more than 500 owners
Form 10-K . . .
Available to the public via the EDGAR database (www.sec.gov).
Almost a “legalistic” document
Difficult to read
Extremely long
Form 10-K - Contents
Item 1 Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4Submission of matters to a vote of security holders.
Form 10-K (EDGARSCAN)
Item 5Market for the Registrant’s common Equity
Item 6 Selected financial data
Item 7Quantitative and qualitative disclosures about market risk
Item 8Financial statements and supplementary data.
Form 10-K (EDGARSCAN)
Item 9Changes in and disagreements with accountants
Item 10Directors and Executive Officers of the Registrant
Item 11 Executive compensation
Item 12Security ownership of beneficial owners and management
Form 10-K (EDGARSCAN)
Item 13Certain relationships and related transactions
Item 14Exhibits, Financial Statement Schedules and Reports on Form 8-K
So . . . Does the 10-K
have any real value to the
average investor?
Annual Report to the Shareholders
Two Schools of Thought
The annual report is a thing of the past. It is a relic and nobody bothers to read it anymore.
The annual report, while no longer occupying the same level of importance it once did, is nevertheless an important document that should be studied by investors.
Every
Every
Even the
Itself . . .
Is Story!
Annual Report
Annual Report
Required by the SEC.
Required by stock exchange listing.
“Required” by public demand.
Annual Report
The first annual report was said to be issued by Baltimore Gas & Electric in 1823
One-page
Handwritten by the Corporate Secretary
Required Contents
Report of management
Auditors’ report
Management discussion
Financial statements and notes
Selected financial data
Optional Contents . . .
Financial highlights
Letter to stockholders
Corporate message
Board of directors and management
Stockholder information
Typical Contents . . .
Impressive front cover
Colored photographs on shiny paper
Dazzling graphics demonstrating the company’s success
Letter to shareholders with positive spin
Four financial statements
Understanding the Corporate Annual Report Lyn Fraser and Aileen Ormiston
Typical Contents . . .
Notes to the financial statements
Report of independent auditors
Management’s discussion and analysis
Five-year summary of selected financial data
Market data
Understanding the Corporate Annual Report Lyn Fraser and Aileen Ormiston
So, how
are we doing?
How about
something more current!