Question

For this discussion summarize a case involving improper revenue recognition. The case you discuss can be one you have observed, or one you have read about. In your discussion explain how the manipulation was accomplished, comment on the possible motivation for the earnings manipulation, and tell us who the perpetrator of the manipulation was. What can we learn from these crimes?

Answer 1

I came across a case while working for an organization wherein the credit notes not yet received by the organization were recorded at the end of the accounting period. These were reversed after the statements had been published. The motivation behind this inappropriate means of revenue recognition was to project a financially healthy image of the company to the stakeholders. The perpetrator of the manipulation was the general manager of the accounts department.

From these crimes, we learn to not take the financial statements at face value. Trend analysis needs to be done to figure out manipulative transactions.