Google testing Google News tweaks

Google is testing a couple of new features on the Google News page, revamping the way users see stories presented on the page and adding content selected by actual human beings.

Perhaps the most striking change (see below) is one observed by Search Engine Land, in which Google is experimenting with a blog-like design that lists news stories by category in a single column, rather than the two side-by-side columns currently used on the page. Within that column, users can set preferences as to which stories they'd like to see the most and Google will also display a "Spotlight" on certain stories across a variety of topics.

But Google News--which debuted with the promise that all stories on the page were selected by algorithms--is also trying out a section called "Editor's Picks," where editors from a small group of publications can display five stories they've chosen to highlight. The publication highlighted in that section will change with each visit to the page, with companies such as Reuters, US Magazine, and The Atlantic among the initial partners according to The New York Times.

It's just the latest move in Google's continual dance with the news industry. There's no shortage of news executives who think Google is a pox on their industry, "stealing" their headlines and content in Google News. But Google is sensitive to those concerns, having pointed out several times that it drives an awful lot of traffic to news sites and is working with news publishers to help them get their content online in a way that makes sense for editors and readers.

Not all visitors to the page will see either or both of the tests, as Google follows its usual practice of "bucket testing" new features with small audiences to get a sense of whether the changes make sense.

(Credit: Search Engine Land)

By Tom Krazit writes about the ever-expanding world of Internet search, including Google, Yahoo, and portals, as well as the evolution of mobile computing. He has written about traditional PC companies, chip manufacturers, and mobile computers, spending the last three years covering Apple. E-mail Tom.

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Why Corporate Fraud Is On The Rise

Lax boards, equity-linked pay lead to rise in financial wrongdoing.

Newspaper headlines aside, only a fraction of corporate executives who manipulate or misrepresent their companies' performances get exposed by regulators for such misdeeds. My company, Audit Integrity, is in the business of uncovering such wrongdoing because it represents a substantial risk to stakeholders.

A subset of such manipulation and misrepresentation is securities fraud, which itself is so egregious that the Securities and Exchange Commission does prosecute some offenders civilly. An indication of just how common such behavior is appears in a study analyzing fraudulent financial reporting in the decade through 2007 that was recently released by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

It is important to note that, while auditors actively support fraud-detection research, they do not guarantee in their audited statements that they will uncover it. That's because auditors believe they too can be misled by clever fraudsters. I understand the auditors' reluctance; material manipulation and misrepresentation are difficult actions to uncover. Turning to the COSO report, the interesting conclusions include these:
--The number of fraud cases increased between 1998 and 2007 in comparison with the level in the prior 10-years studies.

--The dollar value of fraudulent financial reporting soared in the last decade, despite the implementation of the Sarbanes-Oxley Act of 2002.

The Risk List

--Companies involved in fraud were much larger than those observed in a 1988-1997 study.
--Fraud occurred most frequently in the computer hardware and software industries.

--The SEC cited a company's chief executive officer and/or chief financial officer for some level of involvement in 89% of fraud cases studied.

--The most common fraud techniques involved improper revenue recognition, followed by overstatement of assets and bogus expense recognition.

--Among firms involved in fraud, 26% changed auditors between the filing of their final clean financial statement and their final fraudulent financial statement. Sixty percent of the firms involved in fraud that changed auditors did so during the period the wrongful reporting was taking place; the remaining 40% changed auditors in the fiscal period just before the fraud began.

--Press reports of an alleged fraud resulted in an average 17% abnormal stock price decline in the two days surrounding the announcement. News of an SEC or Department of Justice investigation resulted in an average 7% abnormal stock price decline.

--Long-term negative consequences of fraud included bankruptcy, de-listing from a stock exchange or material asset sales.

--The most commonly cited motives for fraud included the desire to: meet earnings expectations; conceal the company's deteriorating financial condition; bolster performance for pending equity or debt financing; or to increase management compensation.

–The average period during which fraud occurred was 31 months.

The Risk List

--There appears to be no difference between the number or character of frauds since the passage of Sarbanes-Oxley. (Note: the sample periods after 2002 are shorter than those prior to 2002.)

--Fraudulent firms disclosed significantly more related-party transactions than non-fraudulent firms.
--All 347 firms prosecuted by the SEC for financial fraud during the decade studied received unqualified opinions from their auditors for their final set of misstated financial filings.

--Financial statement fraud sometimes implicated the external auditor.

--The consequences associated with financial statement fraud were severe for the individuals allegedly involved. However, the severity of the penalties may not be a sufficient deterrent, the COSO believes.

--There were few differences in the boards overseeing companies involved in fraud and those that weren't.
Audit Integrity's independent findings largely mirror the COSO's conclusions. From our perspective, four important issues stand out:

1. Fraud continues to increase, despite Sarbanes-Oxley.
2. The motivations continue unabated.

The Risk List

3. The methods of committing financial fraud have not materially changed.
4. Traditional measures of corporate governance have no impact on predicting fraud.

While the COSO study does not categorically state that fraud has increased (or, at least, has not diminished) since the implementation of the Sarbanes-Oxley Act, it does confirm that there is no evidence Sarbanes-Oxley has had any impact on the commission of fraud.

We are highly doubtful that additional analysis would show any decline in the fraud rate. As mentioned in the COSO report, 89% of the fraud cases implicate the CEO and/or CFO. Sarbanes-Oxley's primary focus is on establishing more rigorous internal controls (Reg. 404); those controls are targeted at multiple levels of management but only indirectly at the C-suite. The board of directors is responsible for protecting stakeholders; it is our opinion that until corporate directors are held to a higher standard, fraud will continue regardless of the rigor of internal controls.

As the economy has faced mounting stress, many companies have been feeling pressure merely to survive. This pressure may lead to fraudulent behavior to mask decaying operations, the COSO points out.

The COSO and our analysis concur that the methods of committing fraud remain unchanged: The majority of the fraud metrics included in Audit Integrity's Accounting and Governance Risk (AGR) model have remained relatively stable over the past decade.




Revenue recognition, asset/liability valuation and expense recognition are the keystones of the AGR model.
It is interesting to note that insider trading was involved in 24% of the cases; insider trading is a key high-risk metric in assessing potential fraud.

In contrast, board composition resulted in no significant difference in the prevalence of fraud, the COSO found. Audit Integrity's research likewise indicates that board composition plays a very small part in predicting fraud.

We do, however, believe certain governance metrics that are independent of accounting metrics do have an impact. These include frequent amendments to financial filings; boards chaired by the CEO; prevalence of incentive pay vs. annual pay for the CEO and CFO; a high ratio of CEO to CFO total pay; large volumes of stock sales by top executives, relative to market capitalization; frequent legal and regulatory issues; and frequent officer changes.

The Risk List

• The Risk List

• Comprehensive Rankings

• Why Corporate Fraud Is On The Rise

• In Pictures

• Retailers Flashing Financial Danger Signs

Among the important conclusions that could be used to curb future fraudulent activity are the following:

--Fraud will persist until boards of directors are held more accountable for their actions.

--If the economy remains under pressure, fraud will continue to increase.

--The 347 cases of fraud prosecuted by the SEC between 1998 and 2007 represent a small number and a nadir during which a blind eye was often turned to fraudulent activity. Under Chairman Mary Shapiro, the SEC appears to have "found its legs." We believe the number of enforcement actions will increase substantially in the coming years.

--The 347 companies prosecuted in the decade through 2007 represent a small fraction of the number of financial fraud cases that occurred. Very few frauds result in SEC enforcement action; many more are adjudicated by class actions. Most are recorded only in stakeholder disappointment, large price drops, bond defaults and insolvency.

James Kaplan is cofounder and chairman of Audit Integrity, a financial research firm based in Los Angeles.

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‘Shameful’ suicides

THE differences between Western and Eastern, particularly Confucian and Buddhist-based, cultures and attitudes towards crisis, hardship and austerity are great, like day and night.

As debtmocratic Greece has shown in the current debt crisis, the ordinary Greeks have resorted to violent demonstrations, strikes and public anger over the various austerity measures being tied to the proposed eurozone and International Monetary Fund rescue package.

While the public outburst over the corrupted Greek government is somewhat justified, their reaction is grossly different from the Confucius and Buddhist-influenced Asians.

The ordinary Greeks should take a very hard look at themselves, and ask honestly whether they should bear a big part of the blame for the serious debt crisis that Greece is in now instead of only violently pointing their fingers at the government for all the blame.

The way the Confucius and Buddhist-influenced Asians would have reacted in such situations would have been totally different. They would have taken the blame mostly on themselves.

We all know that the Japanese economy has not been performing well for the last 20-odd years but do we know the social costs of this slump?

The number of Japanese who committed suicide in Japan in 2009 stayed above 30,000 for the 12th straight year, with suicides due to hardships of life and job losses rising sharply, states a Japanese police survey.
More significantly, suicides traced to job losses surged 65.3% to 1,071 while those due to hardships in life jumped 34.3% to 1,731.

More worrying, depression continued to top the list of reasons for the suicides.
Perhaps even more worryingly, the number of suicides per 100,000 people came to 24.1 among those in their twenties, an all-time high for that age category, and 26.2 among those in their thirties, a record for the third year in a row.

Not surprisingly, the number of suicides jumped in October 2008 – a month after Lehman Brothers collapsed.
This taking-all-the-blame on oneself instead of looking for easy scapegoats can also be seen at another level.
In 2009, monthly suicides increased year-on-year from January to August.

They were especially rampant from March to May as fiscal year-end fund demands picked up during the period.

From 1990 onwards, even as the ordinary Japanese increasingly suffered under the grossly inept Liberal Democratic Party, one has not seen the violent demonstrations, strikes and public anger that is being seen in Greece, at present.

Instead they take their own lives, probably in shame.
As the ordinary Japanese suffers in silence, the economy stumbles from one recession to another. The cycle repeats.

Now, with the global economic recovery in full swing, the ordinary Japanese gets another cyclical and temporary respite from the rising economic hardship.