The July 2, 2004, edition of the Wall Street Journal contains an article by Ken Brown and Mark Heinzl titled “Nortel Board Finds Accounting Tricks Behind ’03 Profits.”

Instructions Read the article and answer the following questions.

(a) Describe the process of “cookie jar” accounting. Include the example used in the article.

(b) What motivation did Nortel’s executives have to engage in the practice of “cookie jar”

accounting?

(c) What actions did Nortel’s board of directors take once the improper accounting was revealed?

INTERPRETING FINANCIAL STATEMENTS