Recent years have witnessed some of the most significant accounting scandals in history. For each scandal listed
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Recent years have witnessed some of the most significant accounting scandals in history. For each scandal listed in Exhibit 6.17, identify how balance sheet quality and earnings quality were impaired.
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Exhibit 6.17 Accounting Scandals (Problem 6.17) Scandal Alleged Accounting Wrongdoing Waste Management (1988; waste management industry) Enron (2001; energy) Falsely increased the useful lives of long-lived tangible assets Underreported balance sheet long-term debt Capitalized rather than expensed expenditures to WorldCom (2002; telecommunications) maintain transmission lines AIG (2003; health care) Lehman Brothers (2008; financial services) Booked debt as revenue Sold toxic assets (i.e., financial investments) to other banks with a buyback agreement, removing the toxic assets from its books Created fictitious revenue recognition journal entries Saytam (2009; IT and accounting services)
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Accounting Scandals Scandal How balance sheet and earnings quality were impaired Waste Management Incorrectly reducing longlived assets estimated useful lives slows depreciation which overstates longl...View the full answer
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Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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