Cooking the Books In The Accounting Wars, author Mark Stevens presents a chapter on Book Cooking, Number
Question:
Cooking the Books In The Accounting Wars, author Mark Stevens presents a chapter on "Book Cooking, Number Juggling, and Other Tricks of the Trade." He quotes Glen Perry, a former chief accountant of the SEC's Enforcement Division: "Companies play games with their financial reports for any number of reasons, the most common being the intense pressure on corporate management to produce an unbro- ken stream of increasing earnings reports." Stevens then lists Perry's "terrible 10 of accounting frauds-ploys used to misrepresent corporate financial statements": 1. Recognition of revenues before they are realized. 2. Recognition of rentals to customers as sales. 3. Inclusion of fictitious amounts in inventories. 4. Improper cutoffs at year-end. 5. Improper application of last-in-first-out (LIFO). 6. Creation of fraudulent year-end transactions to boost earnings. 7. Failure to recognize losses through write-offs and allowances. 8. Inconsistent accounting practices without disclosures. 9. Capitalization or improper deferral of expenses. 10. Inclusion of unusual gains in operating income. Suppose you were a division manager in a major corporation. Give a brief specific example of each of the 10 methods.
Step by Step Answer:
Introduction To Financial Accounting
ISBN: 0131479725
9th Edition
Authors: Charles T Horngren, John A Elliott