Accounting Case Study
1 . Retrieve the SEC's grievance against ClearOne Communications (link provided on Blackboard while using case). Describe management's supposed scheme for inflating revenue.
Management's so-called scheme for inflating income is that in 2001, when the company was not able to fulfill their revenue and income goals, they can record sales on the ebooks as soon as items left the warehouse. So if ClearOne shipped a lot of products during the last week with the quarter (or swept the ground as they call up it), they can be able to meet up with their income projections. Thus basically, they will manipulated their particular revenue by simply placing drastically large orders during the last couple of days of the one fourth. The CEO then recently had an agreement with other companies or perhaps third party reduit to send these people the shipments at no cost, before the shipments were sold and at no risk to that third party. After the deliveries left the warehouse, ClearOne would list the earnings as a receivable on the transaction. ClearOne ongoing to do this at the conclusion of every quarter, which issues with the GAAP principles. 2 . The SECURITIES AND EXCHANGE COMMISSION'S alleges that by the end of fiscal 2002, ClearOne acquired stuffed inventory costing around $11. your five million into the distribution funnel. On the basis of that assertion, the thing that was the estimated amount of its alleged revenue overstatement by the end of 2002?
The approximate quantity of revenue overstatement right at the end of 2002 would be:
3. Does the economic statement info presented support your approximate from question 2? For what reason or why not?
The data from question 2 does not support my estimate of approximately $28 million because in 2002, the accounts receivable stability should be for least 28 million relating to my calculations and the account receivable shown pertaining to 2002 is merely approximately 20 dollars million. That leaves above $8 million dollars unaccounted for. Product sales increased by $15 mil over the last a couple of years which is about 50 % of the lacking $28 million.
4. The SEC believed that...