Federal Sentencing Guidelines for Organizations 375
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Table of Contents xxi
Concluding Thoughts 377 Discussion Questions 378 Endnotes 380 Chapter 6 Cases 385
Case 6-1: SEC v. Halliburton Company and KBR, Inc. 386 Case 6-2: Con-way Inc. 390 Case 6-3: Insider Trading and Accounting Professionals 392 Case 6-4: Anjoorian et al.: Third-Party Liability 393 Case 6-5: Vertical Pharmaceuticals Inc. et al. v. Deloitte & Touche LLP 396 Case 6-6: SEC v. DHB Industries, Inc., n/k/a Point Blank Solutions, Inc. 397 Case 6-7: Livingston & Haynes, P. C. 400 Case 6-8: Kay & Lee, LLP 405 Case 6-9: Reznor v. J. Artist Management (JAM), Inc. 406 Case 6-10: SEC v. Zurich Financial Services 407
Chapter 7 Earnings Management and the Quality of Financial Reporting 410
Ethics Reflection 410 Motivation for Earnings Management 412
Earnings Guidance 412 Income Smoothing 414
Analysis of Earnings Management from a Financial Reporting Perspective 415
Definition of Earnings Management 415 Ethics of Earnings Management 416 How Managers and Accountants Perceive Earnings Management 418 Accruals and Earnings Management 419 Acceptability of Earnings Management from a Materiality Perspective 420 Current Auditing Standards and Presumptions 424
Financial Statement Restatements 426 The Nature of Restatements 426 Restatements Due to Errors in Accounting and Reporting 427
Earnings Management Techniques 428 Financial Shenanigans 429
1. Recording Revenue Too Soon or of Questionable Quality 429 2. Recording Bogus Revenue 430 3. Boosting Income with One-Time Gains 430 4. Shifting Current Expenses to a Later or Earlier Period 430
5. Failing to Record or Improperly Reducing Liabilities 430 6. Shifting Current Revenue to a Later Period 431 7. Shifting Future Expenses to the Current Period as a Special Charge 431
Descriptions of Financial Shenanigans 431 The Case of Xerox 432 Sanctions by the SEC on KPMG 433 The Case of Lucent Technologies 433 The Story of Enron 435 FASB Rules on SPEs 441 Enron’s Role in the Creation and Passage of SOX 442 Lessons to Be Learned from Enron 442
Earnings Quality 442 Concluding Thoughts 443 Discussion Questions 444 Endnotes 447 Chapter 7 Cases 451
Case 7-1: Nortel Networks 452 Case 7-2: Solutions Network, Inc. 456 Case 7-3: Cubbies Cable 458 Case 7-4: Solway, Inc. 460 Case 7-5: Dell Computer 461 Case 7-6: Sweat Construction Company 463 Case 7-7: Sunbeam Corporation 465 Case 7-8: Diamond Foods 468 Case 7-9: The North Face, Inc. 470 Case 7-10: Vivendi Universal 473
Chapter 8 International Financial Reporting: Ethics and Corporate Governance Considerations 475
Ethics Reflection 475 The Influence of Culture on International Financial Reporting 477 Restoring the Public Trust: An International Perspective 479 International Financial Reporting Environment 480
Movement toward IFRS 480 Harmonization of Standards 480 Comparability of Financial Statements 481 Convergence of Standards 482 Condorsement 483 Auditing, Corporate Governance, and Ethics Considerations 484 True and Fair View versus Present Fairly 485
IFRS for Small and Medium-Sized Entities 485
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xxii Table of Contents
Principles versus Rules-based Standards 487 Ethical Considerations 487 Earnings Management Concerns 488 Examples of Rules-based versus Principles- Based Standards 489 The Problem with Provisions and Reserves 491
Global Business Ethics 492 Global Code of Ethics 495 Global Fraud, Bribery, and Suspected Illegal Acts 496
Global Fraud 496 Global Bribery 497 Responding to a Suspected Illegal Act 499
Comparative Corporate Governance 501 Legal and Cultural Considerations 501 Comply or Explain Principle 502 Corporate Governance in Germany 503 Corporate Governance in China 504 Corporate Governance in India 507
CLSA Corporate Governance Watch 2012 508 Concluding Thoughts 510
Discussion Questions 510 Endnotes 513 Chapter 8 Cases 517
Case 8-1: SEC v. Siemens Aktiengesellschaft 518 Case 8-2: Parmalat: Europe’s Enron 521 Case 8-3: Satyam: India’s Enron 526 Case 8-4: Royal Dutch Shell plc 530 Case 8-5: Autonomy 534 Case 8-6: Olympus 537
Major Cases 542 Major Case 1: Adelphia Communications Corporation 543 Major Case 2: Royal Ahold N.V. (Ahold) 551 Major Case 3: MicroStrategy, Inc. 556 Major Case 4: Cendant Corporation 561 Major Case 5: Navistar International 567 Major Case 6: Waste Management 572
Name Index 579
Subject Index 583
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