Final Exam Case Study - MarrySide

Good Essays
1)
In my opinion, Stephen Richards’ actions were not very serious. While he was not directly involved in the misrepresentation of Computer Associates’ misreporting of their revenue and earnings in 1999 and 2000, he was aware of the problem and took no action. Richards was indicted because he facilitated the extension of the fiscal quarter, allowed subordinates to obtain contracts after the quarter end, and failed to alert the finance and accounting departments about contracts that may have been backdated. Even though this misreporting and backdating contributed to higher quarterly revenues and earnings, this misreporting was not hurting anyone in the process. Yes, investors may have had a skewed value for the company because of their incorrect financial statements, but these revenues were not unearned, they were just earned in a different fiscal quarter. I believe that Richards stated the severity of his actions perfectly by saying “there was an important difference between Computer Associates and other well-publicized corporate scandals: WorldCom, Enron, Adelphia all bankrupt. There were no shell companies where liabilities were hidden or converted to assets. This was simply a timing issue of a deal coming in and being recognized two or three days earlier than it should”. Since the Computer Associates scandal was directly related to the timing of their reporting and not the sneaky, and ill intended actions like other well publicized corporate scandals involved, the severity of this case is minimal. Also, Richards is only liable for not being aware of the situation and making a change to it. As the head of global sales, it was Richards’ responsibility to make sure the company’s revenues on licensed software was reported correctly.
2)
If Computer Associates achieved the same positive financial results through GAAP flexibility, I would still consider Stephen Richards at fault, but again not in a sever way. As a leader of the company, it is Richards’ responsibly to

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