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Creative Accounting, Fraud and International Accounting Scandals by Michael John Jones

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Chapter 11

Creative Accounting and Fraud in Greece

George Kontos, Maria Krambia-Kapardis and Nikolaos T. Milonas

11.1 INTRODUCTION

Fraud, embezzlement, side payments, insider trading, creative accounting and creative transactions are all evidence of the same human behavioural trait of bypassing a set of rules to advance one’s own objective. This behaviour is not confined to certain periods of time, a particular country or to a specific area of activity. The behaviour of individuals in charge of decision-making or in control of operations has caused multinational companies from different national origins like Barings, Enron, Siemens, Société Générale, Parmalat and Sumitomo Corporation, to mention but a few, to either go bankrupt or lose a significant part of their value.

Despite sophisticated auditing and computer information systems, human minds can find the way to overcome security controls and act on their own. In 2008, according to press reports, the case of Jerome Kerviel – who seems to have bet on the stock market rising using derivatives without hedging his positions but instead falsifying hedge documentation (and in the process losing €4.9 million for Société Générale) – may prove to be an example of such human behaviour (Cimilluca, 2008). Usually and in general, excessive trading positions beyond authorized levels, and against the rules and procedures, are discovered only when markets turn against such positions. At other times, such behaviour may not be discovered or ...

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