Review of Related Literature

Canada-Jims Cezar

Blackwell (2018), in his article entitled “Accounting scandals inevitable” stated that,
‘it’s just luck’ that Canada has not been hit with a major accounting fraud. It was also
added by the professor at the Richard Ivey School of Business at the University of
Western Ontario named David Sharp that he doubted that Canadian firms are, on
average, much more rule-abiding in their accounting than their American counterparts.
One key difference is that Canadian firms are generally smaller than U.S firms so when
scandal or fraud erupts here, it isn’t on the massive scale of the WorldCom Inc. situation,
according to Sharp. WorldCom revealed that it overstated its profit by billions of dollars
after improperly accounting for $3.85 Billion (U.S) in costs as capital expenditures. Mr.
Sharp said he wouldn’t be at all surprised if some time soon a few Canadian firms were
discovered to have stretched their accounting judgments beyond what is generally
accepted.

Thomas Allen, a lawyer at Ogilvy Renault in Toronto who has been involved in
Canadian efforts to beef up accounting standards, also warned that Canadians shouldn’t
be too self-satisfied about the relative dearth of financial malfeasance. However,
according to Al Rosen a forensic accountant and a perennial critic of Canadian accounting
practices that this has happened repeatedly in Canada, but not on the same sort of scale
as Enron or WorldCom. Rosen said he personally investigated about 400 accounting
negligence cases over the past 15 years. He also added that, it is inevitable that there will
be a big scandal in Canada that results in the collapse of a major firm. Another industry
player, who didn’t want to be identified, said the big scandals often start with companies
deciding that they can “stretch” financial rules a little. Then, “if little things can be
stretched, little things have a habit of growing out of control”.