Prelim 1 - Study Sheet

Prelim 1 - Study Sheet - Fraud Cases Xerox 1 Cookie Jar...

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Fraud Cases Xerox 1.) “Cookie Jar” – Storing revenue off balance sheet and strategically releasing the stores. 2.) Acceleration of revenue from short-term equipment rentals, which were improperly labeled as long-term leases. i. Long term leases can be included as revenue in the first year of the agreement ii. The value of a rental is spread out over the duration of the period iii. The effect is that Xerox can count as earnings as what was essentially revenue Computer Associates International 1.) Kept its books open to record revenue to record revenue from contracts executed after the quarter ended to meet Wall Street quarterly earning estimates. WorldCom 1.) 3.8 Billion in expenses improperly booked as capital expenditures 2.) Improper recognition of revenue i. Qwest – “Swap” transactions ii. Merck – Recorded co-payments collected by the pharmacy, Merck does not receive this Etc. HealthSouth Corporation 1.) Revenue recognition – fictitious sales, inaccurate timing, improper valuation 2.) Expense recognition – improper capitalization, deferral of expenses, incorrect use of reserves, understatement of expenses 3.)
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