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Corporate Fraud in Richards Letter - Essay Example

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This paper “Corporate Fraud in Richard’s Letter” will analyze the case represented in Richard’s letter. Corporate fraud entails the violations of the Internal Revenue Code (IRC) and other related rules committed by vast, publicly or privately traded corporations or by senior executives…
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Corporate Fraud in Richards Letter
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Download file to see previous pages The seriousness of Richard’s action against Richard, as the global head of sales, in the Computer Associates Corporation, he was involved in various acts, which affected his responsibilities in the company. One of his actions was the facilitation of an extension of the fiscal quarter (Soltes 4). This was indeed serious since it affected the reporting of the other fiscal quarters. The effectiveness of the information reported by extension of a fiscal quarter would be affected. Richard was also accused of allowing his subordinates to obtain contracts after the end of a fiscal quarter (Soltes 4). This is serious because it will influence the accuracy of the financial reports used by the stakeholders. The accuracy of financial information for the organization is remarkably essential for both the management and other stakeholders involved such as the investors. Inaccurate financial information may affect the expectations of the prospecting investors and shareholders of the organization. It is better for an organization to give accurate financial information rather than falsehood representation. Information represented falsely can lead to extortion of investors emanating from misleading financial information. ...
Although the actions of Richard emanated from the company’s culture of maintaining its performance, the actions of Richard did not follow ethical standards. When proper accounting approaches according to GAAP are used, accurate and efficient financial information is obtained. The chief reason for carrying out investigations on Computer Associates Company was because SEC doubted the accounting reporting of the company. When GAAP approaches are not used in a company’s financial reporting, it is most likely that the company’s financial reporting would have problems. For instance, one of the GAAP approaches is the matching principle, where revenues are recognized in the period of their earning or in the period when expenses that match the revenues are paid. In Computer Associates Company, there was a problem regarding the recognition of revenues. It was noted that; some of the contracts were signed after the last day of a fiscal quarter. This had an impact on the recognition of revenues since revenues obtained from the contracts signed after the end of a trading quarter, could either be related to the first quarter or the following fiscal quarter. Falling of stocks by 42% and fall in expected financial results in the first quarter of 2001 made SEC notice that some accounting procedures of the company were not proper (Soltes 3). If the company achieved the same accounting results through GAAP, it would have implied that there could be other contributing factors other than the use of wrong accounting principles. For instance, there could be a misappropriation of funds, which could also be investigated by the relevant authorities.  ...Download file to see next pages Read More
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