Reporting Irregularities in Financial Statements: Case Study

Reporting Irregularities in Financial Statements: Case Study Nowadays, especially is Bulgaria, people are becoming more and more hungry for money, that is why the word fraud takes part more often in our speech. Fraud is part of criminal law, and it comes when we have personal gain by fraudulent way or damaging another individual. The most common purpose of frauds are connected with person or entities trying to assign and stole money or valuables. There are plenty of models, which are especially constructed to define and reveal frauds, most of them will be used in this paper to decide whether Asil Nadir should be sentenced or not. More about analysis and comparisons with other cases and examples of models can be found in appendix 1 and 2. Proposed Fraud Investigation Plan for Polly Packs Financial Statement Fraud Given below is the proposed investigation plan for Polly Packs financial statement fraud: 1. Develop an understanding of the activities of Polly Pack To understand the activities of microfinance institutions, the auditor should pay attention to: the main concerns of the leaders on the objectives and strategies of the institution, the institutions organizational structure, operation of its business, results of operations, ability to self-finance, operations and other major economic events may affect its financial statements, accounting issues and changes accounting policies, and funding sources. To obtain this information, the auditor should meet with the leaders of the institution; visit at least one agency, and review reports and other documents. 1.1 Interviews The auditor should meet the main leaders of Polly Pack, including CEO, the head of the financial service or financial director, credit responsibly and activities, and the head of information systems. This is also the time for the auditor to discuss the first time with the staff of the internal audit, the Board of Directors and major shareholders or lenders, if they have subjects of concern that should be subject to review missions on the basis of agreed or special audits procedures. During these interviews, the auditor should bear in mind the list of items of financial statements. After these initial meetings, the auditor should assess any breach of financial reporting requirements. Analysis of financial statement must be carried out prior to this interview since financial statements may present many significant anomalies. If the first investigations reveal a level of unacceptable business practice or misleading presentation of financial, the auditor may seek further in-depth investigation into a particular area. 1.2 Visits The auditor must visit several regional offices to acquire understanding of the institutions activities and responsibilities that were decentralized. Auditors should perform some initial visits at the stage of pre-commitment, and more visits during the planning phase. 1.3 Review of financial reports and documents The auditor should also consider the reports and other documents for a better understanding of the institution. Unless they are not available, the following may be helpful: previously audited financial statements, budgets and strategic plans; the monthly activity reports, including tables of cash flows, the credit statistics and reports on outstanding; loan agreements and grants; assessments by donors; evaluation reports and correspondence from the authorities re-rules A thorough reflection needs to be carried out on the appropriate reports for Polly Peck, according to its size and age. 1.3 Understand the standards and accounting methods The accounting rules and methods of Polly Peck are not conventional, and therefore require special attention from the auditors 2. Evaluating Accounting Standards The external auditor shall determine the accounting standards used by the institution. Many microfinance institutions do not follow the national standards or international. 2.2 The accounting policies During the pre-commitment, the external auditor should ask the management of the institution which accounting method it uses. Sometimes the service accounts of the institution are not able to answer this question. Many institutions have adopted accrual accounting, sometimes in a modified form. This accounting method is consistent with the standards imposed by most accounting bodies. But some institutions continue to use cash. Auditors should know that it can be in the interests of Polly Peck to register their activities, especially the product credits, according to a cash basis, taking into account adjustment proposals made at the end of the year by the auditor. Since operations of Polly Peck were overseas in Turkey, it did not follow a uniform accounting from one account to another, which further complicates the work of the auditor. 2.3 The legal structure of Polly Peck in Turkey in the Context of Company Law of the Region The auditor must look at how the institution considers as a publicly owned multinational. This vision often has implications for accounting. In foreign countries organizations usually produce financial reports that reflect less rigorously financial performance. Some do not even produce financial statements Annual. The majority uses the cash and excludes amortization, adjustments for inflation, provisions for risk changes, provisions for social security, and other similar items to gain from tax exemptions. As regulated financial institutions, Polly Peck must not only comply with generally accepted accounting principles, but also the specific regulations governing banks. 2.3 Examine accounting statements for any financial irregularities Auditors must engage in the following activities The external auditor should investigate books of account and internal control of the institution through: discussions with managers and staff at various levels; review of documents such as procedure manuals, descriptions positions and organizational charts; consideration of the reports produced by the accounting department; compliance with the institutions activities, including IT operations and loan processing at headquarters and agencies 3. Reporting Irregularities in Financial Statements Accounting operations of Polly Peck were generally de-centralized because of the operations of the organization taking place in Turkey. In such companies, the activity of an agency is often recognized at the regional level, then transmitted periodically (usually monthly) to the head office. This is usually responsible for the production of consolidated financial statements. In some institutions, all the accounting is performed at headquarters. 3.1 Reporting irregularities of internal control systems Multinational businesses need a strong system of internal control to ensure the success of its operation. However, Polly Peck was significantly weaknesses at this level, and the auditor should therefore pay particular attention to the evaluation system organization of internal control. Since, the board of Polly Peck was largely passive, and the governance structure tends to be lax. This is why the system of internal control organization of the institution depends largely on the level of commitment and competence of its management. 3.2 Take into account the audit risk As with any audit, the auditor must explicitly assess the audit risk, that is to say, the opportunity to express an opinion on incorrect the accuracy of the financial statements of the institution, both in terms of financial statements at the level of account balances. Audit risk has three components: inherent risk, the risk control, and the risk of non-detection. At the financial statement level, the main determine risks are inherent risk and control risk. Regardless of the system of internal control, some risks come from the nature of the business activities and its industry. At Polly Peck a significant number of account staff did not fully understand the credit procedures as they have been trained to work in the social field rather than in the field financial. Accounting was carried out by staff with little experience of double entry accounting, international accounting standards, etc. In addition, the organizations activities were decentralized and geographically dispersed often in remote areas without adequate infrastructure. 3.3 Identify breaches of risk control policies faulty procedures may cause a significant risk control through audits of microfinance institutions. Yet internal controls are crucial for microfinance institutions. When the internal control has too significant weaknesses, the audit of the institution may become impossible. If control risk is high, the auditor must evaluate whether we can to use extensive substantive tests, and if this approach is economically feasible for the institution. In addition to a thorough evaluation of internal controls, the external auditor must test the controls made à ¢Ã¢â€š ¬Ã¢â‚¬ ¹Ãƒ ¢Ã¢â€š ¬Ã¢â‚¬ ¹at the account balances but prior to these tests, the external auditors should explain their understanding and evaluation systems, using checklists of descriptions and charts. 3.4 Identify risk of non-detection The risk of non-detection, that is to say the risk of material misstatement not be detected by the auditor shall be determined for each balance account, this risk depends on the assessment of inherent risk and risk control. 3.5 Defining the level of significance The definition of significance levels is crucial in determining the nature, e- tense, and timing of audit procedures. A significance level is limit beyond which the potential errors are considered problematic. If the sum of uncorrected misstatements identified during the audit de- passes the threshold of significance, the auditor may not be able to issue an unqualified opinion. The significance level is inversely related to audit risk. more the audit risk, that is to say the combination of inherent risk, risk control and the risk of non-detection is evaluated as important, the higher the threshold significance is low. In other words, only a low level of defects not corrected is acceptable. The significance depends on the determinants identified during the mission planning. An important determinant of financial statements is a factor that users of financial statements are most likely to focus their attention, given the nature of the institution. Identification of factors determinants is a matter of professional judgment. Determinants, which can be used to determine the significance level are e.g. net income, total assets, revenues, and funds own. Significance levels may vary between 2 and 10% of factor. In the United States, some use external auditors, as basis of materiality for a commercial bank, 2% of total assets. For an institution whose weak internal controls, the auditor may reduce significant at 1% of total assets acceptable rate abnormalities. There is no general rules to define the thresholds of significance, hence the auditor should use his/her judgment. The evaluation by the auditor of materiality and audit risk at planning the audit, may change after evaluating the results of audit procedures. This may be due to a change in circumstances, or a development of knowledge of the listener, following the audit. For example, if the audit is scheduled before the end of the year, the auditor will anticipate the results of and financial position. If actual results to differ materially from this estimate, the assessment of materiality and audit risk may be changed. 3.6 Evaluation of the internal audit and relations with auditors internal The external auditor should consider the work of internal auditors during the phase planning the audit. Internal auditors evaluate and monitor systems accounting and internal control. Internal audit is an essential element to ensure a sound internal control system, and also an important tool reduction, detection and investigation of fraud. 3.7 Obtain an approved status laws or regulations may impose establishment of an internal audit service. When there is an internal audit function, the auditor must evaluate its objectivity, its scope, technical skills and rigor. This assessment must include a review of the service organization, its staff, its purpose, its reports and programs. Potential conflicts must be evaluated. For example, if the audit service Internal reports on its work in the service that he is auditing, the question of the objectivity of the findings of the internal audit service arises. such situation can significantly reduce the value placed on the work of the internal auditor by the external auditor. Ideally, the internal audit department must account of his work directly to the board or committee audit, if one exists. If the external auditor believes, following a screening assessment, the internal audit service is reliable, it must test the work performed by the service to confirm this assessment. This i s usually done by performing a new test on a sample of the work performed by the auditor. Conclusion The paper laid down a methodical approach to investigate fraud in financial statements of Polly Peck to identify whether the CEO or the top management of the company was involved in deliberate falsification of financial statements to raise share price of the company and to fraud shareholders of the company. The key consideration in this plan was triangulation of the elements of the investigation to find out whether all elements of the financial reporting match. Triangulation is all the more important for investigation of Polly Pecks finances since the operations of the company were overseas and centralized reporting was not carried out of companys finances. Appendix 1 In this Appendix will be reviewed a part of Polly Peck`s frauds and most of the unclear moves and actions of Asil Nadir, also will be made a consideration and comparison with Enron case. Polly Peck was a great company with a superb vision on the market and it won`t be a lie if it is said that is was a shareholder dream for every investor in the world. It has many close points of fraud to Enron case. The first fraudulent coincidence is that in both cases the most important papers and documents disappear. Enron shredded tons of paper, while in Polly Peck`s case they just disappear and Nadir told that there are no available and existing documents in their original. The second conjunction with Enron case is that Polly Peck built a hotel in Turkey, which costs around 70 million and the debt of the company did not increase. In Enron the debts were transferred and funded to other small companies. The main idea here is the head company to looks attractive, valuable and without debts. The third coincidences between both companies is that they deal with complementary goods, which can`t be substitute. As well Enron, in Polly Peck case we have huge problems with accounting. In the first case we have fault accounting, here also emerge some misleadings in this sector/department. Appendix 2 In this appendix will take a look at the meanings of the methods and approaches, which are part of fraud investigation and help us to reveal a fraud. Firstly, it should be known that such investigation is quite expensive and it should be started if there are really serious reasons that fraud occur. Testimonial evidence: This type of evidence is collected from people, who are interviewed and persuade to fill in honestly test, to realize whether we can believe in them. In Polly Peck`s case should be used this model, to take an interrogation with the people worked for this company and eventually may know something important. Documentary evidence: This type of evidence is collected from computers, documents, servers, data mining, public records, searches and so on. In addition, in such situations the databases are great source of information, no matter the information is deleted, it can be restored. This type of evidence can be used as well in this case, because most of the fraudulent information is saved on computers and if restored can answer us the basic question, is there a fraud or not. Physical evidence: This type of evidence is concerned with taking fingerprints, id numbers, weapons, stolen property and so on, which can be linked to a fraudulent act. Personal observation: This type of evidence is also named sense evidence, because it is very close to the information, which is heard, seen, felt, etc.. A second method of investigating a scheme is to focus on the fraud triangles. It should be investigated all variants, elements of the following triangles. Theft act: try to seize the perpetrator to wrench a data or information. Concealment: In this part should be taken under consideration and used documents, computer hard disks, etc. Conversion: is to define whether the defendant used money or property fraudulently for personal benefit. An great example of this type is the case: [Brandt v. State, 1944] Atmospheric Drag Model | Essay Atmospheric Drag Model | Essay The atmospheric drag 1 – Introduction The principal non-gravitational force acting on satellites in Low-Earth Orbit (LEO) is atmospheric drag. This effect for a LEO satellite has direct implications in satellite lifetime. Indeed, drag acts in the opposite direction of the velocity vector and removes energy from the orbit. This energy reduction causes to the orbit to get smaller, leading to further increases in drag. Eventually, the altitude of the orbit becomes so small that the satellite reenters in the atmosphere. The equation for acceleration due to drag is: : atmospheric density (kg.m-3) satellite’s cross-sectional area (m ²) : satellite’s mass (kg) : satellite’s velocity with respect to the atmosphere (m.s-2) : drag coefficient (dimensionless) : ballistic coefficient Drag presents a challenge to accurate modeling, because the dynamics of the upper atmosphere are not completely understood, in part due to the limited knowledge of the interaction of the solar wind and the Earth’s magnetic field. In addition, drag models contain many parameters that are difficult to estimate with reasonable accuracy: atmospheric density, ballistic coefficient, cross-sectional area Calculating atmospheric density is often the most difficult part of assessment in modeling the atmosphere. Its complexity is apparent from the sheer number of regime. In addition, although values are shown for temperature and altitude, they all change over time and are very difficult to predict. Strong drag occurs in dense atmospheres, and satellites with perigees below 120 km have such short lifetimes that their orbits have no practical importance. Above 600 km, on the other hand, drag is so weak that orbits â€Å"usually† last more than the satellites’ operational lifetimes. At this altitude, perturbations in orbital period are so slight that we can easily account for them without accurate knowledge of the atmosphere density. At intermediate altitudes however, roughly two variable energy sources cause large variations in atmospheric density and generate orbital perturbations: the geomagnetic field and solar activity. These variations can be predicted with two empirical models: the Mass Spectrometer Incoherent Scatter (MSIS) and the Jacchia models. Knowing that the considered satellite should be at an altitude of 700 km (the last launches of nano-satellites demonstrate that the start altitude is often very inaccurate), the Jacchia model is the most accurate one to estimate atmospheric density, and in this way satellite lifetime. 2 – The Jacchia atmospheric density model The Jacchia atmospheric density model formulation is very common, but also very complex. The model contains analytical expressions for determining exospheric temperature as a function of position, time, solar activity and geomagnetic activity. With a computed temperature, density can be calculated from empirically determined temperature profiles or from the diffusion equation. Then the overall approach is to model the atmospheric temperature. In this way, to simplify the analytical resolution, the altitude range will be constraint from the start altitude at 700 km to 200 km. 1 > Evaluating temperature Jacchia defines the region above 125 km in altitude with an empirical, asymptotic function for temperature: : distance between satellite and ground station (â€Å"height above the reference ellipsoid†) (km) : base value temperature (Kelvin) : corrected exospheric temperature (Kelvin) : inflection point temperature (Kelvin) As needed in the two equations above, the corrected exospheric temperature is defined as below: : uncorrected exospheric temperature (Kelvin) : correction factor for exospheric temperature (Kelvin) represents the exospheric temperature without any correction. It is based on the nighttime global exospheric temperature, excluding all effects of geomagnetic activity: Where is the average daily solar flux at a 10.7 cm wavelength for the day of interest and is an 81-day running average of values, centered on the day of interest. Because the effect of solar flux on atmospheric density lags one day behind the observed values, calculations can (at best) use values which are one day old. The resulting value of can be used now to determine the uncorrected exospheric temperature. : sun’s declination : geodetic latitude of the satellite , (-180 ° Actually can be determined from the dot product and the two vectors for the Sun and the satellite. More complicated methods are available to determine the, but the precision here does not need extra accuracy. Now the geomagnetic activity and its effect on temperature have to be corrected. The correction factor for exospheric temperature,, depends on the geomagnetic index, , and is calculated for altitudes at least 200 km. The actual value of is with a 3-hour lag, in which the molecular intersection build up and the change in density would be noticed. 2 > Evaluating density scale height For planetary atmospheres, density scale height describes a difference in height, over which the density of the atmosphere changes significantly by a factor e (approximately 2.71828 , the base of natural logarithms, decreasing upward). Usually, the scale height remains constant for a particular temperature. However, in the upper part of the atmosphere, it changes significantly and in different ways. For instance, at heights over 100 km, molecular diffusion means each molecular atomic species has it own scale height. This part will only focus on density scale height at altitude above 105 km. The temperature profile has to be integrated in the total number density of the five atmospheric components, in order to achieve their individual effect on the standard density. As the altitude assumed above 500 km, the concentration of hydrogen have to be taken into account also. First of all, the hydrogen number density at 500 km altitude (in cm-3): Implemented in the hydrogen number density equation for altitude greater than 500 km: : molecular mass of hydrogen erg/ °K : Boltzmann’s constant Then the number density of the other atmospheric components which are nitrogen N2, oxygen molecular O2 and atomic O, and helium He (in cm-3): i denotes N2, O2, O or He : number density of each constituent at 105 km altitude : thermal diffusion coefficient (only for Helium) The correction for Helium number density because of seasonal-latitudinal variations is (dimensionless): And implemented here: Finally, the total number density is given by (in cm-3): Hence, the mass density (in gm/cm-3): : mass of the constituent I in gm/mole Which gives the molecular mass: : Avogadro’s number Finally, the density scale height, according to the temperature profile which depends mainly of the satellite’s altitude and position from the Sun: : universal gas constant 3 > Evaluating density Jacchia used a standard exponential relation to evaluate density: : base atmospheric density (kg.m-3) : distance between satellite and ground station (â€Å"height above the reference ellipsoid†) (km) : base altitude (km) : scale height (km) An interesting point to highlight is below 150 km, the density is not strongly affected by solar activity. However, at satellite altitudes in the range of 500 to 800 km, the density variations between solar maximum and solar minimum are approximately 2 orders of magnitude. The large variations in density imply that satellites will decay more rapidly during periods of solar maxima and much more slowly during solar minima. The effect of the solar maxima will also depend on the satellite ballistic coefficient. Those with a low ballistic coefficient will respond quickly to the atmosphere and will tend to decay promptly. Those with high ballistic coefficients will push through a larger number of solar cycles and will decay much more slowly. Note that time for satellite decay is generally measured better in solar cycles than in years. From there to lifetimes of about half a solar cycle (approximately 5 years) there will be a very strong difference between satellites launched at the start o f a solar minimum and those launched at the start of solar maximum. The first correction to apply to this equation is for seasonal latitudinal variation in the lower thermosphere: : geodetic latitude, measured positively north from the equator (deg) : Julian date of 1958 (years) The Julian date of 1958 is used to determine the number of years from 1958. is the number of days from January 1, 1958: The correction for semi-annual variations is as below: This correction uses an intermediate value : For altitudes above 200 km, the geomagnetic effect can be neglected on density. Hence, these corrections can be apply to the standard density: Giving the final corrected density: Even though any model cannot do a real adequate job of modeling the atmosphere, the Jacchia model continues to perform exceptionally well compared to the others and is the fastest overall. Moreover, it is the only one which give analytical formulas which can be computed without external values, even though that degrades the result in a way. 3 – The ballistic coefficient Drag also depends on the ballistic coefficient, defined as a body measure of the ability to overcome air resistance in flight. For instance, satellites in LEO with high ballistic coefficients experience smaller perturbations to their orbits due to atmospheric drag. In regards to the nano-satellite analysis, mass and cross-sectional area do not change at any time. Actually, nano-satellite cannot change their position because they do not have any ergol propellers. Hence this coefficient depends mainly of the drag one. The drag coefficient of any object comprises the effects of the two basis contributors to fluid dynamic drag: skin friction and form drag. In most cases, this coefficient is estimated. Considering the configuration of the spacecraft as a regular brick-like shape and the environment conditions, it is estimated here at 2,1. Theoretically, it is highly impossible to have an exact solution, only experiments might approximate it. Ligneous Periodontitis: Literature Review Ligneous Periodontitis: Literature Review Abstract: Ligneous periodontitis is poorly defined, a rare form of periodontitis. It is characterized by pseudomembranous gingival lesion with accumulation of amyloid-like material and may or may not be associated with ligneous conjunctivitis. It is possibly due to type I plasminogen deficiency but the exact cause is unknown. This review describes ligneous periodontitis in detail with respect to etiology, clinical, histological features and treatment modality. Key words:  Ligneous periodontitis, ligneous conjunctivitis, pseudomembranous periodontitis, plasminogen deficiency Introduction: The term ligneous periodontitis was first used by Omer Guuhen et al1 to describe a destructive membranous periodontal disease. It is poorly defined entity characterized by gingival enlargement and periodontal destruction due to accumulation of amyloid-like material. Accumulation of amyloid-like material lacks the classical histochemical and ultrastructural features of amyloid.2 Most of the pseudomembranous gingival lesions have been reported in association with ligneous conjunctivitis. Therefore, finding suggests that both clinical manifestations are related. Ligneous conjunctivitis is rare form of chronic conjunctivitis that usually affects children, girls more often than boys in ratio of 3:1 but may occur at any age.3,4 This condition is ocular manifestation of a systemic disease that might be accompanied by formation of pseudomembranes on mucosa of oral cavity (ligneous periodontitis),1,5,6,7 respiratory tract-larynx, trachea6,8,9,10, nasopharynx , female genital tract (ligneous vulvovaginitis or cervicitis),6,10 middle ear ,9,10 gastrointestinal tract the mastoid system.10 Etiology: Etiology of this lesion is not clear. Among the possible causes Type I plasminogen deficiency, autoimmune reactions, trauma, hypersensitivity reaction, genetic disorders and secondary response to viral or bacterial infections have been suggested.5,6,11 Mingeret. Al12 and Schuster13 et al have reported homozygous mutations in plasminogen gene in ligneous conjunctivitis cases. It is suggested that plasminogen deficiency plays a central role in pathogenesis of this rare disease. The fibrinolytic system plays an important role in hemostasis for controlled dissolution of fibrin clot. Two type of human plasminogen (PLG) deficiency exists:14 Hypoplasminogenemia / type I PLG deficiency: In which markedly decrease PLG antigen ≠¤ 1.9 mg/dl (normal range 6 to 25 mg/dl) and functional activity upto 33% (normal range 80% to 120%) Dysplasminogenemia/ type II PLG deficiency: There is reduced PLG activity, but normal or only slightly reduced PLG antigen levels.3 Type I PLG deficiency was found to be associated with ligneous conjunctivitis (80%)6 characterized by fibrin rich pseudomembranes mainly on tarsal conjunctivae and other pesudomembranous lesion such as ligneous gingivitis and periodontitis (34%).3 Autosomal-recessive inheritance of this disorder was confirmed.13 In a large epidemiologic study in the United Kingdom, the prevalence of (heterozygous) type I PLG deficiency was reported to be 0.26% (25 of 9,611 subjects).16 The theoretically predicted prevalence of homozygote/compound heterozygote was estimated to be in the range of 1.6 per 1 million people, at least in Europe.3,8 Type II PLG deficiency patients, however, have never reported developing pseudomembranous lesion. PLG plays an important role in intravascular and extravascular fibrinolysis and wound healing. It is converted to plasmin by cleavage of the Arg561-Val562 peptide bond by either tissue-type PLG activator (tPA) or urokinase-type PLG activator (uPA). Activation of PLG by tPA is the major pathway that leads to efficient lysis of fibrin clots in the blood stream, whereas activation of PLG by uPA seems to be mainly responsible for mediating PLG activation in association with cell surfaces (wound healing, tissue remodeling).14 uPA PLG activation related to cell surfaces (wound healing, tissue remodeling) PLG tPA PLG activation lead to lysis of clot in the blood stream The main substrate for plasmin is fibrin. Plasmin also has substrate specificities for several other components of the Extracellular matrix (ECM), including fibronectin, proteoglycans, and gelatin, indicating that plasmin also plays an important role in ECM remodeling. Indirectly, plasmin also degrades additional components of the ECM via its ability to convert some promatrix MMPs (pro-MMPs) to active MMPs. During normal wound healing of the gingiva, significant fibrinolysis occurs by day 3 to 4 and is virtually complete by 1 week. Persistence of the fibrin matrix is associated with the induction of angiogenesis and formation of granulation tissue.17Mingers et al12 were the first to show that plasma polymorphonuclear elastase protein levels were markedly elevated in patients with severe plasminogen deficiencies and more so in homozygous than in heterozygous patients. It is interesting to note that all patients with type I PLG deficiency have never been shown to have thrombophilia. In ligneous periodontitis, it is assumed that fibrin appearing during normal wound healing is persistent due to type I PLG deficiency. Plasminogen is the precursor of plasmin, the main fibrinolytic enzyme which plays important roles in wound healing, keratinocyte division, migration, and differentiation. Central wound healing capacity with an arrest at the stage of granulation tissue formation and excessive fibrin deposition is possible cause of ligneous periodontitis. Clinical features of ligneous periodontitis: It is presented as generalized ulcerated, massive, nodular, waxy gingival enlargement can involve both maxilla and mandible.2 Gingival swelling could be painless or painful. Enlargement is white-yellow to pinkish pseudomembranous covering teeth, with tendency to bleed. Accompanied by extensive bone loss may lead to loss of teeth.1 Histological features: Amyloid is a nonspecific histologic term for different chemical structures such as immunoglobulin light chain, serum amyloid fibril proteins, beta-2 microglobulin, transthyretin, keratin and some hormones.18 All these materials look like homogeneous eosinophilic substances by routine histologic methods and show the same three-dimensional configuration. There are two different phases of development:1 In the first, gingival epithelium showed extensive irregular down-ward proliferation. Severe acute inflammation of epithelium and underlying tissues with accumulation of homogenous eosinophilic fibrinous material around the vessels and beneath the epithelium. The inflammatory infiltrates included mostly plasma cells and polymorphonuclear leukocytes, with fewer lymphocytes and mast cells. Epithelium in acute phase showed edematous widening of intercellular spaces and contained numerous degenerated keratinocytes in the suprabasal layer in the form of hyaline apoptotic bodies. Subepithelial connective tissue is also edematous and contained numerous small dialated vessels and an amyloid like material. In second phase, the epithelium showed slight acanthosis and parakeratosis without ulceration. Inflammatory cell infiltrate is not as heavy as in first stage. There is subepithelial amorphous, nodular, homogeneous, eosinophilic amyloid-like accumulation. The accumulated material did not show the typical apple green/ golden brown birefringence of amyloid with Congo-red stain. Thioflavin-T fluorescence methods for demonstration of amyloid is also negative. Accumulation is reticulin poor and stained red with Masson’s trichrome stain. Immunostaining shows strongly positive for fibrinogen and weakly positive for immunoglobulins. Electron microscopy of gingiva shows fine filaments, approximately 10nm in diameter arranged in interweaving bundles resembling those seen in ligneous conjunctivitis. Within this network there are short bundles of thicker, darker filaments resembling epithelial tonofilaments and also fragments of cellular debris. No typical collagen fibers were found within this material.19The reason why the amyloid-like material in these cases failed to show all the tinctorial properties of amyloid can be explained by considering the process of amyloidogenesis. For materials like immunoglobulin light chain and keratins to acquire the typical properties of amyloid, a time-dependent series of events must occur consecutively.19 Failure of one or more of these stages to take place may conceivably result in the formation of a material which shares only some of the features of amyloid. This half-amyloid, half-hy aline material (hyaline-amyloid) needs more filamentous degeneration of the deposited materials in order to stain as typical amyloid.19 TREATMENT: Several treatment efforts such as subgingival curettage, gingivectomy, chlorhexidine rinsing and antibiotics were unsuccessful. Surgical excisions of gingival lesion are followed by rapid recurrence of membranous lesions. Extraction of most permanent teeth appears to be inevitable due to advanced alveolar bone loss and poor prognosis of this ligneous disease. Administration of topical plasminogen has shown good results for the treatment of ligneous conjunctivitis,20 whereas its efficacy for the treatment of oral lesion remains to be elucidated. It is expected, however that topical plasminogen together with periodontal therapy can postpone it until adulthood, when a more aggressive approach can be considered. In some cases gingival lesions become  quiescent or disappear following tooth loss.2 Frimodt- Moller5 also noticed some regression in the eyelid lesion following tooth extraction. Different modalities of surgery, antibiotics, steroids, antiviral agents, beta and x-ray irradiati on were found ineffective in the treatment.6