Managing/Manipulating the Numbers - Essay Example

The truth of the allegation of fraud is supported by the fact that Dell agreed to be penalized with $100 million to settle charges imposed by the Securities and Exchange Commission of the United States. Mr. Dell however did not admit or deny guilt, but his having agreed to pay should be interpreted still as evidence of guilt and practice of earnings management or manipulation of accounting records to make the company look better than actual. Dell had taken advantage of telling its earning to be high to investors and the same must have indeed misled investors which allowed the company to remain attractive when the truth was otherwise.

Non-admission of guilt does not make it less true. The fact that there is payment of penalty should indicate that something wrong was committed in managing its financial information to serve a purpose of defrauding decision makers. Managing a company’s reported assets, liabilities, revenues, expenses, or income is generally meant to have the company to appear better than actual when reports are made available to users to cause the latter to believe what the preparers of information want to happen.

Dell then needed to show good profitability, good liquidity and good gearing and it was successful by misrepresentation to obtain favorable prices of its stocks and to have good credit position. The correct accounting information came out only after SEC has accused the company and the latter has agreed to pay the penalty without the case reaching the courts. Other companies including and Enron and World.com have also committed management of their accounting information that resulted in fraud.

Enron’s case is fraudulent practice in its revenue recognition when it used the mark-to-market accounting allegedly to reflect the true economic value of its transactions from what was called complex long-term contracts (Thomas n.p.). Using complexity as a camouflage, Enron recognized