Royal Ahold NV - The US Foodservice Accounting Fraud
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(Case Code: FINC044) click on the button below, and select the case from the list of available cases:
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Case Details: |
Price: |
| Case Code |
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FINC044 |
For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling ChargesThemes
Accounting and Control |
| Case Length |
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18 Pages |
| Period |
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2000-06 |
| Pub Date |
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2007 |
| Teaching Note |
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Available |
| Organization |
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Royal Ahold
NV, US Foodservice |
| Industry |
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Retailing |
| Countries
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US/Netherlands |
Abstract:
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The case examines the accounting fraud at US Foodservice (USF); a subsidiary of
the Netherlands based retailer - Royal Ahold NV. It discusses in detail the
system followed by USF to account for promotional allowances. The case
highlights the role of USF's management in the accounting fraud who
intentionally booked higher promotional allowances to show higher income in
order to get extra bonuses. It also examines the reasons that lead to accounting
frauds such as poor financial and accounting controls, weak internal control
system of the parent company over its subsidiaries, lack of transparency in
accounting procedures and linking of management's compensation with the
achievement of revenue targets.
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The case then describes the measures taken by
Ahold to regain shareholders' confidence and strengthen its
control systems and governance practices.
Issues:
» Understand the accounting of supplier rebates in the food retailing business
» Study the reasons for lack of proper rules and standards to account supplier
rebates due to which it is susceptible to misappropriation and fraud
» Examine and analyze the accounting scandal at USF and the circumstances that
led to the continuation of fraudulent accounting practices
» Study the reasons for overlooking the observations of financial due diligence
team by Ahold during the acquisition of USF
» Examine the methods adopted by USF employees to account for promotional
allowances and the role played by the suppliers who provided false confirmations
» Examine the necessity of centralized control system for companies like Ahold,
which have grown over the years through acquisitions
» Analyze the corrective measures taken by Ahold to regain shareholders'
confidence
Contents:
Keywords:
Royal Ahold NV, Accounting Fraud, US Foodservice, Promotional
Allowances, Vendor Rebates, Average Percentage Rate, Internal Control System,
Financial and Accounting Control, Financial Due Diligence, Acquisition, Balance
Sheet Adjustments, Internal Control Weaknesses, Road to Recovery program,
Capital Budgeting, Vendor Allowance Programs
Royal Ahold NV - The US Foodservice Accounting Fraud
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