Business

The Parmalat Scandal is one of the largest scandals in the corporate history. The scandal saw the collapsing one of the largest food companies in Italy after the disappearance of over 10 billion in declared assets (Rogmans, 2004). Such disappearance of large amounts of cash has been used by many to question the effective of our accounting system as it led to the collapsing of the Parmalat Company.

The scandal involved the offsetting of liabilities by using assets which were not in existence (Morgan, 2004). Such transactions were conducted in association with offshore and foreign financial companies. This forced the company to start scrambling for the missing assets. It has been rightly claimed that the scandal involved forgery cash inflow into the bank of America as well as cash transfers to non existence accounts (Morgan, 2004). This scandal was discovered in 1999 and has seen an approximated 11 people arrested and charged in connection with the case. The founder, Calisto Tanzi was sentenced 10 years in jail for fraud. This discovery was thanks to a legal provision in the Italian laws which require firms to change auditors after ever nine years.

According to business ethics, it is illegal to claim sell of non-existent assets. The
Parmalat Scandal was thus a contradiction of the underlying accounting laws and regulations (Sverige, 2004). It is however to be noted that such a business ethics failure have evidently led to the implementation of new and highly reflective rules and regulation in the accounting profession. The Italian laws on auditing have ever since the discovery of the scandal changed. This has led to the broad implementation of the Sarbanes-Oxley legislation and its provisions on auditor terms (Rogmans, 2004). This is because, like other scandals, the Parmalat Scandal involved collusion between the firm management and auditors.

In conclusion, the Parmalat Scandal marked the fall of one of the largest food companies in Italy. Though it was a sign of failure in the effectiveness of the commercial law, it is evidently clear that it marked the broadening of the implementation of more effective auditor regulations. The scandal has thus positively changed the accounting profession.