CH10 Case 7-5 Dell Computer:

1.

In his analysis of the Dell fraud for Forbes, Edward Hess comments:

"Too often, the market's maniacal focus on creating ever-increasing

quarterly earnings drives bad corporate behavior, as it apparently did at

Dell. That behavior produces non-authentic earnings that obscure what

is really happening in business. Short-termism can result in a range of

corporate and financial games that may enrich management at the

expense of market integrity and efficient investor capital allocation."

Comment on Hess's statement from two perspectives:

earnings management and

financial analysts earnings projections.

2. Explain the difference between financial statement fraud and

disclosure fraud. How did Dell use each one to produce materially

misstated financial results?

3. Do you agree with the court opinion that PwC did not act with

fraudulent intent, therefore, not holding it legally liable? How can

fraudulent intent be established in a case like Dell?