Our project team analyzed the Fraud and Illegal Acts Case (True blood Case Studies- Case 08-9), which involves a questionable sales transaction made between Jersey Johnnie’s Surfboard, an SEC registrant, and Mr. Sinaloa, an independent sales representative of the company. As a simplified overview of the case, an external audit firm was hired on to perform a year-end audit of Jersey Johnnie’s Surfboards, Inc. Towards the end of the audit, the engagement partner notified the auditors that there could be a possibility of fraud and illegal acts made by the company. The engagement partner received a call from the company’s director of ethics and compliance, who stated that an anonymous employee of the company had called into the hotline questioning a sales transaction that seemed suspect. The sales transaction occurred at year-end on December 31, 2010, which seemed suspicious because of the timing of the transaction and effect the transaction had on the year-end figures. Specifically the employee noticed a sales invoice dated December 31, 2010 made out to a Mr. Sinaloa. This transaction was suspect for the employee because the company does not typically recognize revenue associated with products shipped to Mexico until Mr. Sinaloa presents the company with a confirmed sales order.…
purposes, the sale to Abby in 2003 would result in deferring the reporting of the gain of…
The government has well intentioned regulations enacted to protect individuals and organizations from an action or an omission that violates or influences the material reliability of a financial statement or audit. Illegal acts committed by clients must segregate activities that do not include the entity that is having their financial statements audited. Equally, illegal acts also include the acts of management or individuals that act in the interest of the aforementioned entity.…
This case study is the first of a two-part Earnings Management Case. The purpose of Part…
Excello Telecommunications is looking to record revenue before the earning process has been completed or before the unconditional exchange has occurred. Terry Reed, the CFO is trying to influence the accounting department to look for options to record the sale of 1.2 million in equipment by December 31 to boost earnings on financial statements. The purchasing company does not want the order of equipment delivered until the middle of January.…
governmental oversight of accounting fraud and abuse has drastically improved over the years. In the past, many companies used the flexibly in accounting framework to alter financial statements. This was done to present a seamless depiction of the statements to their investors. There is a theory that not enough accountability has existed in government. Once governmental accountability improves, then companies will be more likely to deter from waste, fraud and abuse (acfea, 2009). The Security and Exchange Commission (SEC) eventually introduced detailed changes in the accounting framework to restrict fraud and abuse. The government now pays more attention to what is going on in the financial arena and is ultimately responsible for the oversight of accounting fraud. The implementation of internal controls helps to reduce the possibility of fraud and it also insures that the company complies with the SOX rules and regulations. If our company becomes a government supplier, once the bid is accepted, it will come under scrutiny and will be required to comply with the Sarbanes Oxley Act (acfe,…
Among the managers selected, only 4 are "young international managers" (=who speak Spanish fluently and had already lived and worked in Latin-America), and 4 others are "traditional and international managers" (=who speak Spanish and have already had an international experience).…
Chapter 5: the Sarbanes- Oxley act of 2002 involved the public anger that started when Enron, WorldCom, and other big companies scandals. This is when there was support for white collar crime when it came to accounting standards. Under the law of federal sentencing rules to make sure that white collar criminals are being punished. (Barnes, 2012). 1. For someone to alter or get rid of documents and there intensions to obstruct or effect the crime/case. 2. The CEO (chief executive officer) and the CFO (chief financial officer) must clarify that repots have been submitted to the SEC (securities and exchange commission.) it is a crime if the CEO and CFO make a report that is false. 3 CEO and CFO must reimburse the company for any raises and if…
In this paper you will learn about an unusual or conflicting accounting principle that has impacted Apple Inc. We will review and analyze the organizations published accounting statements of the last two years. Well will also be identifying the core functions of each department, their strengths and weaknesses, and make recommendations for improvement it is needed. Then we will identify and describe the underlying problem or conflict and compare the alternative courses of action. The effects of the issue will be explained and we will recommend options that would be consistent with the organization’s accounting practices, accounting processes, and accounting-related departments. Lastly, we will include the last two years of published accounting statements.…
SEC Chairman Arthur Levitt decried what he termed "accounting hocus-pocus" and called for coordinated efforts to uncover it. He targeted the practice by some companies of improperly boosting reported earnings by manipulating the recognition of revenue. Among the most common methods of doing this are the bill-and-hold transaction and a long list of sham transaction involving shipping, billing and/or related-party involvements. Both the SEC and the AICPA seek to increase independent auditors ' awareness of problems associated with these practices.…
Carte, Penny and Fox, Chris, (2004), Bridging the Culture Gap: A Practical Guide to International Business Communication, Library of Congress Cataloging-in-Publication Data, Retrieved November 17, 2006 from: http://www.amazon.com/gp/reader/0749441704/ref=sib_dp_top_toc/002-9731822-8892040?%5Fencoding=UTF8&p=S009#reader-page…
At the end of 2010, Excello faced the possibility of not meeting earnings estimates, which affects bonuses, stock options, and shareholders’ earnings (Mintz & Morris, 2011). Terry Reed, the Chief Financial Officer (CFO) of Excello contemplates recording a $1.2 million sale at the end of 2010 instead of in January 11, 2011. The issue at hand is that according to Generally Accepted Accounting Principles (GAAP) Excello must record this sale according the revenue recognition principle. If recorded according to GAAP, the accounting department records the $2.1 million sale to the accounts receivable account until the product ships, at which time the transaction records to the earned revenue account. If Reed records the $1.2 million sale in 2010 instead of 2011, he deceives the internal and external users of the financial reports by artificially inflating the end of year reports for 2010. This is an ethical breach as well as an impropriety against GAAP standards. If Excello inflates earned revenue for 2010, they risk defrauding shareholders according to the Securities and Exchange Commission (SEC). Intentionally reflecting inaccurate information in the financial statements not only breaks state and federal law but also breaches the codes within the Sarbanes-Oxley Act of 2002…
The issue of revenue recognition practices is an area that has received a lot of attention from regulators. Whenever there is a report of financial restatements or negative earnings, regulators pay extra attention to review the financial statements in order to verify that that there are not any indications of financial fraud or that the organization overstepped their boundaries in the area of managed earnings. The reason that regulators have taken a special interest in financial accounting and potential fraud is due to the collapses of companies such as Enron, WorldCom and Tyco. Regulators and those in the accounting profession are focusing their efforts on the causes of fraud as well as the steps that can be taken to effectively detect and prevent a possible reoccurrence of fraudulent behavior especially in the area of revenue recognition and the overstatement of assets.…
A firm can be seen as a set of contracts, in which accounting information plays an important role of improving their efficiency. This memo discusses the contracting issues based on the team presentations in class, using Eli Lilly & Co. example. The two parts include the overview of Eli Lilly and the analysis of its sales contract.…
The accounting practices at Carlton normally permit revenue recognition after the shipment of the computer systems. Peale, Gower and Quill, Carlton’s auditors, are worried about the accounting practices regarding revenue recognition of certain transactions during the last quarter of 20X1. They are also worried about the adverse effects of such accounting on the company’s quality of earnings and thereby on its planned public stock offering in February 20X2.…