Advanced Accounting Report: Penn West Scandal, Impact & Stakeholders

This report provides a comprehensive analysis of the Penn West accounting scandal, a significant case of financial misreporting. The report details the company's fraudulent practices, including violations of Generally Accepted Accounting Principles (GAAP), which led to the overstatement of profits and misrepresented financial performance. It examines the impact on accounting procedures, highlighting how the company manipulated financial statements to mislead investors. Furthermore, the report assesses the repercussions for various stakeholders, including the company itself, employees, and shareholders, detailing the financial losses, legal actions, and reputational damage suffered. The analysis includes the consequences for senior management, the regulatory responses, and the long-term effects on the company's operations and market valuation. The report concludes with a discussion of the lessons learned and the importance of corporate governance in preventing similar accounting scandals in the future.

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Table of Contents
Summary of the Scandal............................................................................................................2
Impact on the Accounting procedures........................................................................................2
Repercussion for the Stakeholders.............................................................................................3
Reference....................................................................................................................................5

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Summary of the Scandal
Penn West was regarded as one of Canada’s largest oil and gas producers at the time
of the alleged offences and the company was in its growth phase. The company was involved
in an accounting scandal which misled the investors and causes significant losses for the
investors. The company was suffering from high operating losses which was affecting the
operations of the business and thereby also the profits which the business was able to
generate (Bhandari & Kulkarni, 2016). The senior officials of the company reported a whole
different story in their interim reports which showed that the business was able to generate
appropriate profits. The intention of the senior management was to dupe the investors with
improper accounting treatments, The business faced both civil penalties and law suits when
the accounting scandal was noticed by the watchdogs in the US market.
Impact on the Accounting procedures
The business used to follow the GAAP principles for reporting financial information
of the entity. The accounting scandal revealed that the management of the company had
violated the provisions of GAAP for reporting the operating expenses for the business during
the period which directly impacted the profits overstating the same in comparison to what
actually existed. The business also misrepresented the net earnings of the business in terms of
sales which the business was able to generate considering the oil which was extracted by the
company (Obiri, 2013). The business was also trying to ensure that the debts also did not
impact the operations of the business and therefore portrayed a favorable balance sheet so
that the investors can be attracted to the operations of the business.

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Repercussion for the Stakeholders
The stakeholders of the business was affected the most with the scandal as their
interests were compromised. The stakeholders who faced repercussions for the actions of the
company are explained below:
Company: The Company lost its image in the market and significantly impacted the market
valuation of the company. In addition to this, there was lost tis to partnerships and had to
suffer from debt crisis which totally hampered the operations of the business. The company
had to face lawsuits from SEC for the losses and its involvements in the corporate scandal.
The business would be required to pay a sum of $ 53 million to settle the claims of the
lawsuit.
Employees: The business was on the verge of collapse and therefore the livelihood of the
employees were also at stake. The senior officials of the company faced civil charges as well
as criminal charges for their role in the accounting scandal.
The senior employee were also held responsible for the accounting scandal which affected
the financial market of US. SEC's complaint, which was filed in federal court in. Manhattan,
also charged former Chief Financial Officer Todd Takeyasu, former vice president of
accounting and reporting Jeffery Curran, and former operations controller Waldemar Grab.
The employee charged with criminal charges for their involvement in the accounting scandal.
The SEC also suggested the directors should be banned from adopting such a role in the
future.
One other consequence which can be understood from the accounting scandal was that tight
regulations was brought about so that such an incident does not take place in future ever
again. There were also significant consequence for the senior employees who were the main
culprit for the accounting scandal (Nigrini, 2016). The management of the company had to

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change the name of the company to Obsidian Energy so that the business is able to make
some changes in the operations of the business. The senior officials took steps such as reduce
the capital expenditure for the company and also sell off its assets so that it can pay for the
litigation charges. The changed management also take steps for reducing the debt structure of
the business so that the risks can be managed in an appropriate manner/ The shareholders
who were present with the company at the time of the scandal was compensated and at their
suggestions changes were also made to the remuneration requirements for executives for the
business. These are the measures which was implemented by the company so that the
operations of the business can be optimized and reputation can be improved in the market.

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Reference
Bhandari, A., & Kulkarni, K. (2016). North America: petro state. Gateway House, 13.
Nigrini, M. J. (2016). The implications of the similarity between fraud numbers and the
numbers in financial accounting textbooks and test banks. Journal of Forensic
Accounting Research, 1(1), A1-A26.
Obiri, C. (2013). Financial Fraud Detection for the Prevention of Business Failure–Enron
and Lehman Brothers. Lulu. com.