Amazon, fraud and disruption

Appearing in In The Black magazine, February 2022

Amazon Unbound: Jeff Bezos and the Invention of a Global Empire
Brad Stone
Simon & Schuster

Amazon has become so embedded in the global economy and our collective psyche that it is hard to remember the world before it. Stone, a senior editor at Bloomberg News, examined the evolution of the company from an online book seller to a dominant player in retail in his 2013 book The Everything Store, and in Amazon Unbound he continues the story to trace how the company became a trillion-dollar behemoth. In fact, the company has made plenty of missteps, from attempts to introduce its own phone to its mixed-results forays into China and India.

But there have been successes such as the introduction of AI, the move into Hollywood through digital streaming, and a series of important acquisitions. Amazon ruthlessly adheres to its principles of technological innovation, operational frugality, continually looking for scalability, and relentless focus on customer service. It also analyses its mistakes, and founder Bezos accepts that some experiments will inevitably fail.

Amazon has become so wealthy and powerful that it seems able to shrug off any setbacks, even with a growing number of critics and enemies. But Stone wonders if this can continue, especially with Bezos stepping out of the CEO role to become executive chairman.

When Numbers Don’t Add Up: Accounting Fraud and Financial Technology
Faisal Sheikh
Business Expert Press

Sheikh brings a great deal of academic and practitioner experience to bear in this book, as he examines the problem of accounting fraud from operational, technological and psychological perspectives. The incidence of accounting fraud, either for direct personal gain or to misrepresent the financial situation of a company, is growing, and the development of Big Data and cyber currencies is making the problem worse. Oversight practices have not kept up and auditors are in danger of being overwhelmed by the flood of granular, non-financial information.

Analysing recent cases, the book provides a number of important frameworks to detect fraud. Sheikh looks at the type of personality commonly associated with accounting fraud, and at the interaction of pressure, motivation and rationalisation. He also provides a list of  ‘red flags’, such as dubious valuations, the proliferation of unexplained bank accounts, and personal connections in the ranks of senior executives and board members.

As a remedy Sheikh proposes the adoption of an “Ethical Triangle” he has developed, and he notes that the training of auditors has to be revised and broadened. An appendix provides a compendium of the literature, making the book a useful resource for students as well as practising financial professionals.

Accounting Disrupted: How Digitalization Is Changing Finance
Alnoor Bhimani
Wiley

Digitalisation is an upheaval in business practice, and the finance profession will need to redesign itself if it is going to survive. Bhimani, a professor of accounting with the London School of Economics, argues that accounting information must begin to describe what will take place rather than what has occurred. This means gathering insights from diverse sources, with a focus on emerging opportunities and risks. At the same time, new technologies such as blockchain and AI point to a move away from traditional reporting as real-time transparency increases and improves.

Bhimani looks at examples where this has been successfully done, and is adept at drawing out the lessons. The key point is a change of thinking. Accountants must be able to put aside some old skills and take up new ones, and managers must reconsider their recruitment and retention strategies. Senior executives must develop some fresh ideas about how to utilise the company’s finance function, working out what questions they need to ask. Bhimani emphasises that this is not simply about adapting to a ‘new normal’ but about dealing with continuing disruption. For finance professionals, the critical task will be to see and explain what is coming down the road.

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