With integrityboth within the letter and the spirit

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with integrity—both within the letter and the spirit of the law. Our Code of Conduct isreinforced consistently at all levels and in all countries. We have maintained stronggovernance policies and practices for many years.The management of PepsiCo is responsible for the objectivity and integrity of ourconsolidated financial statements. ….We are committed to providing timely, accurate and understandable information toinvestors. Our commitment encompasses the following:Maintaining strong controls over financial reporting.Our system of internal control is based on the control criteria framework of theCommittee of Sponsoring Organizations of the Treadway Commission published in theirreport titledInternal Control—Integrated Framework. The system is designed to providereasonable assurance that transactions are executed as authorized and accuratelyrecorded; that assets are safeguarded; and that accounting records are sufficientlyreliable to permit the preparation of financial statements that conform in all materialrespects with accounting principles generally accepted in the U.S.()The SEC is clear on this issue.For example, Mary Ann Gadziala, former SEC associate director,commented:The foundation of an effective compliance program is an overarching compliance cultureat the firm—a culture of honesty and integrity that permeates the firm, not simply asuperficial, technical compliance with the letter of the law. It is the firm’s overallresponsibility to ensure that the compliance program is taken seriously. An effective
compliance program is substantive and compliant not only with the letter, but the spirit,of the law. (Gadziala, 2005. “Integrating Audit and Compliance Disciplines within the RiskManagement Framework.” New York, NY. November 30, 2005. Speech.)
ASSIGNMENTSTrue/False Questions1Sensormatic is presented in the text as an example of overstating revenue via recordingfictitious revenue.
2Sensormatic overstated its revenues by shipping goods before the customer needed themand instructing the carrier to delay delivery.
3Sensormatic overstated its earnings by creating false reserves in one period and reversingthose reserves into earnings in future periods.
4It was fully legitimate for Xerox to record the present value of the future period’s paymentsfor servicing equipment in the period in which the leases were concluded.

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Term
Spring
Professor
Cecil Jackson
Tags
Revenue, Revenue Recognition, Chapter 4 Solution

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