Case Study Of Xerox, Accounting Fraud Caren Adkinson
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Xerox, Accounting Fraud Caren Adkinson From 1997 through 2000 Xerox Corporation had defrauded investors. Under the direction of senior management, Xerox masked its true operating performance by using hidden accounting maneuvers. Xerox admitted that they had used improper classification of revenue for 5 years. (www.wsws.org/en/articles/2002/07xero-j01.html) In which all the maneuvers were violations of the Securities Act and GAAP. Xerox used acceleration to recognize equipment revenue by $3 billion and increased earnings by approximately $1.5 billion.
Xerox used these techniques to meet Wall Street earnings to be able to stay on the stock market. Investments of the 1990’s were tense, many companies that didn’t meant…show more content… Europe’s CEO also confirmed a steady decline in sales, but after “closing the gap” it assisted in “containing” the decline in profit. (Journal of Accounting and Finance, vol 11(2) 2011) Xerox failed to disclose these action to shareholders. “Oh what a tangled web we weave, when first we practice to deceive!” By Sir Walter Scott. I believe this quote is perfect for what Xerox had used in the actions of senior management. Keep manipulating the numbers, however sooner or later you will get caught.
Xerox also used the sales type lease as immediate revenue, they also claimed it was impracticable to estimate the fair value of the equipment. Xerox used “Return on Equity” (ROE) and “Margin normalization” In 1997 Xerox confronted more difficulty in meeting expectations, the company used ROE broadly. It also used margin normalization in Europe, Brazil and other Latin American offices.…show more content… Yoho was an auditing partner and continually failed in the audit procedure of Xerox. He did not maintain proper documentation and due care. Yoho did not follow up on any concerns that surfaced. KPMG gave unprofessional opinions to Xerox for 3 years. The SEC brought charges against Yoho for his role in assisting Xerox in accounting fraud. (Journal of Accounting and Finance, vol 11(2) 2011) Yoho was censured pursuant to Rule 102 (a). According to SEC Rule 102(a) is "highly unreasonable conduct" that results in a violation of applicable professional standards in circumstances in which an accountant knows, or should know, that "heightened scrutiny" is warranted. This part of the final rule amendment differs from the proposed amendment. This provision covers a single instance of serious misconduct that may not rise to the level of intentional or knowing (including reckless) conduct.