The report mainly concentrates on the Accounting theory, standards and the financial evaluation of QBE INSURANCE COMPANY. In the report, the main focus has been put on the annual report of last 3 years. It also focuses on the financial fraud of the company. The financial statements of the company have been evaluated on the basis of the AASB and GAAP rules in order to identify the mistakes in the financial statements which led to the financial fraud.
QBE INSURANCE COMPANY is an Australian insurer company. It offers the insurance service in the American, Australian, Asia and Europe pacific region. The main products of the company are general insurance and reinsurance services. In 2017, around 14,500 employees have been employed which are handling the operations in 37 countries. In 2012, company have been awarded as top general insurance company at global level.
The financial report of QBE INSURANCE COMPANY of last 3 years have been evaluated and it has been found that in the year of 2016, the Ex-QBE executive got prison for 1.5 years in US for embezzlement. The executive, James Shea had embezzled $ 2.6 million from the insurance company. The executive had abused the position of responsibility in the company (Reuters, 2018). Due to these fraud, the performance and the goodwill of the business has hampered amongst the investors of the company.
The James Shea has planned very thoroughly to conduct this fraud in the company, He had misused the position and the manipulation of financial statement had also been done by him to affect the decision of the investors and other stakeholders of the business. The company’s annual report (2018) clearly states that the company is following the Australian accounting standards and conceptual framework of AASB to manage the performance and the position of the company. However, Shea had managed to conduct the fraud in the company and affected the performance of the company.
The share price trend of the company of last 3 years has been evaluated of last 3 years and according to the trend it has found that before the fraud, the stock price of the comapny was higher but due to the bad impact on the stakeholders, the overall performance of the company has hampered.
The stock performance of the company was $ 12.59 before the financial fraud but after the disclosure of the fraud the stock price of the company had become $ 9.3, and it has taken a long time by the company to manage the stock price again and motivate the stakeholders to invest into the company.
Figure 1 Share price of QBE
(Yahoo Finance, 2018)
Yahoo finance (2018) explains that the stock performance of the company has improved and due to it, various significant changes have taken place into the company in current scenario. The insurance laws and regulations are bit different and due to which, it becomes tough for an auditor to measure the financial recording and the fraud in an insurance company.
Australian accounting standards and the conceptual framework is used by the accountant and the auditors to prepare, present and evaluate the financial statements. It is theoretical framework which brief norms, rules, guidelines, assumptions etc to set the uniformity in the financial reports and reduce the chances of error and fraud in the final financial statement of a company (AASB, 2014).
The company’s annual report (2018) clearly states that the company is following the Australian accounting standards to prepare the final reports of the company. The recording of taxation, impairment losses, disclosure, income tax expenses, auditor’s report, director’s report etc of ABE brief the company has used the Australian accounting standards to record the details and the financial transaction of the business.
However, it has been found that the accountant has not taken the entire detail from the other department about the funding to the parties and due to which the executive, James Shea has succeed to embezzle $ 2.6 million from the insurance company (Insurance Journal, 2018). The bit activeness and the sincerity about checking all the receipts and detail of the payment could help the company to identify the fraud in the business.
It has been found that after the fraud, the accounting department of the company and the auditors have become more active and start evaluating all the records and documents to identify that whether any fraud is taking place in the business or not (Press release, 2018). The insurance laws and regulations are bit different and due to which, it becomes tough for an auditor to measure the financial recording and the fraud in an insurance company.
Through the evaluation on the annual report, it has been found that all the recordings and disclosure has done by the company on the basis of the AASB rules. Company has even disclosed in the financial notes that these figure have calculated and recorded through the AASB rules (IASB, 2006).
The final financial statement format of the business has also been set by the business according to the AASB rules. The company has shown all the details about the final financial items of the business in the financial notes to make it easier for the stakeholders of the business to make decision about the performance of the company (IASB, 2007).
Figure 2: AASB
(Annual report, 2018)
The QBE has also focused on its fraud management strategies and altered the policies according to the current performance of the company. It has been found that the company has divided the fraud management into various departments to make it easier for the people to identify the fraud and reduce it from the company (IFRS, 2008).
The financial statement of the company explains that after exposing the financial fraud of the company, the financial performance of the company has been better. The total revenue of the company has been improved though the higher cost of revenue has led to the net profit towards negative amount. The financial performance statement brief strong position of the company in last 3 years though, after the disclosure of fraud the performance has gone down but again the improvement rate is higher (Yahoo finance, 2018).
After the disclosure of the fraud, the cash level of the company has been reduced to $ -1,90,000. Further, the company has developed the motivation again in the company and managed the cash position of the company (Guthrie and Pang, 2013). However, the current cash level of the company also explains about higher liquidity risk of the company.
Conceptual framework is a set of rules which mainly focuses on the simplicity, transparency etc of the financial reports of a business. On the basis of the financial reports of the QBE INSURANCE COMPANY, it has been measured that the conceptual framework has been followed by the company in order to prepare all the financial reports. The company has followed the rules of framework and disclosed all the activities of the business so that the transparency could be maintained. All the final financial statements of the company have been prepared after following the conceptual framework. It has helped the business to improve the motivation and attractiveness level among the investors of the company.
The proper framework and format has also been followed by the business to prepare the final financial statements and the financial notes of the business. The fundamental qualitative characteristics of annual report of the company also brief that the company has followed all the rules and conceptual framework to record the transactions and prepare the annual report.
Conclusion:
On the basis of the report, it has been found that in the year of 2016, the Ex-QBE executive, James Shea has embezzled $ 2.6 million from the insurance company. The position of executive has been abused by Shen and it hampered the sense in the company of responsibility as well. After disclosure of the fraud activity in the business, the overall performance of the business has been affected at huge level.
The accountant has not collected the relevant information from related departments about the financial activities and proves, due to which, James Shea has succeed to embezzle $ 2.6 million from the insurance company. however, the current annual report of the company explains that the overall performance of the business has been improved from 2016 along with that the accountant and the auditor has started paying their extra attention on the business to revoke the fraud activities from the business.
References:
AASB, C.A.S., 2014. Business Combinations. Disclosure, 66, p.77.
Annual report. 2018. QBE INSURANCE COMPANY. [online]. available at: https://www.qbe.com/investor-relations/reports-presentations (accessed on 23/8/2018).
Guthrie, J. and Pang, T.T., 2013. Disclosure of Goodwill Impairment under AASB 136 from 2005–2010. Australian Accounting Review, 23(3), pp.216-231.
IASB. 2006. Summary of International Accounting Standards. International Accounting Standard Boards. Retrieved 20 January 2007 fromhttps://www.iasb.org/Home.htm
IASB. 2007. Fair Value Measurement. Part 2: SFA’s 157 Fair Value Measurements: Comments to be submitted. London: IASB
IFRS. 2008. International Financial Reporting Standards. London: IASB
Insurance Journal. 2018. Ex-QBE Insurance Executive Sentenced to Jail for $2.6M Embezzlement Scheme. [online]. available at: https://www.insurancejournal.com/news/national/2016/04/01/403905.htm (accessed on 23/8/2018).
Press Release. 2018. Department of financial services. [online]. available at: https://www.dfs.ny.gov/about/press/pr1803151.htm (accessed on 23/8/2018).
Reuters. 2018. QBE INSURANCE COMPANY. [online]. available at: https://www.reuters.com/article/us-qbe-insurance-usa-fraud-idUSKCN0WX31W (accessed on 23/8/2018).
Yahoo finance. 2018. QBE INSURANCE COMPANY. [online]. available at: https://finance.yahoo.com/quote/QBE.AX/cash-flow?p=QBE.AX (accessed on 23/8/2018).
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