The paper “Corporate Governance & Ethics Course” will look at earnings management, which is approaches applied by the manager of a particular organization to intentionally alter the company's earnings so that the end result matches a pre-determined objective against the reality…
This obsession made Bernie encourage managers to push a rise in revenue realization of the company; the manager gave less consideration to whether capital investments would overshadow the short-term returns from the projects of the company. As business operations deteriorated in the 1st quarter of the year 2000, the company’s revenue also declined thus affecting the already set E/R ratio. CFO Sullivan applied the following accounting tactics to achieve the desired performance of the organization:
2. Expense capitalization: Sullivan formulated an excellent getaway plan where he began identifying current expenditures of surplus network capacity as longterm expenditure rather than current expenses.
Earnings management is approaches applied by the manager of a particular organization to intentionally alter the company's earnings so that the end result matches a pre-determined objective against the reality. This exercise is conceded out for the resolution of income smoothing. Instead of having a prolonged period of high earnings which may later be followed by a poor performance of the company the management may choose to try to keep the figures relatively stable by adding and removing cash from reserves. This will show how, over a certain period, the company has performed.
Abusive or fraudulent reporting is considered by the S&EC to be "a substantial and deliberate distortion of financial results". In the event of income smoothing becoming extreme, the Securities & Exchange Commission may issue fines against the organization.
The internal audit department was supervised by Cynthia Copper; the internal audit department was expected to report directly to Sullivan. Struggles by Cooper to obtain more information concerning WorldCom’s capital expenditure and accruals were with no success.
Andersen’s the external auditor was offered restricted access to the bookkeeping records. ...
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(Corporate Governance & Ethics Course Case Study Example | Topics and Well Written Essays - 750 Words)
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