Covering Up Trading Losses: Opportunity-Cost Accounting as an Internal Control Mechanism / Edward J. Kane, Kimberly DeTrask.

Format:

Book

Author/Creator:

Kane, Edward J.

Contributor:

National Bureau of Economic Research.

DeTrask, Kimberly.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6823.

NBER working paper series no. w6823

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Covering Up Trading Losses

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1998.

Summary:

This paper analyzes the methods of loss concealment used by rogue traders in the Barings and Daiwa scandals. The analysis clarifies how and why these firms' top managers and home-country regulators deserve blame for allowing cumulative losses to become so large. The central point is that information systems that focus exclusively on cash flows tempt amoral traders to build credits that generate a high level of accounting profits. Constructing opportunity-cost measures of profit imposes additional restraints on reporting activity. These restraints make it easier for higher-ups, auditors, and regulators to identify the true sources of accounting profit and to challenge counterfeit earnings.

Notes:

Print version record

December 1998.