Essay on Impacts of Tyco's Financial Statement Misstatement

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A discussion of the impact on the misstatement of the company's financial statement. What was the effect on the balance sheet, income statement, and company cash flow? How might this affected stakeholders. perception of the company? From 1996 to 2006, Tyco violated various federal securities laws by the means of using inopportune accounting methods that involved transactions that had no economic substance; therefore, the overstatement of their financial results by at least one billion dollars had significant effect on statements submitted involving the balance sheet, income statement, and the company cash flow. In addition to the falsely portrayed financial information, Tyco shattered the perception of stakeholders and shareholders…show more content…
The misuse of accounting rules correspondingly affected the establishment and utilization of purchase accounts reserves. Furthermore, the fraud further asserts that, apart from its procurement activities, Tyco inappropriately established and used several kinds of reserve funds to make alterations at the end of reporting periods. These alterations make at the end of the reporting period were used to boost and smooth its publicly reported results and to meet earnings forecasts.
In addition to the Security Exchanges allegations, Tyco as a company failed to disclose in their proxy statements and 10-Q reports failed to report certain executive compensations, executive acknowledgements, and related party expenses. These kind of off the book compensations and related party expenses will understate expenses on the income statement and cash flow statement. By the means of their accounting methods, Tyco tried to mask operating expenses, the costs associated with those bonuses in the years of 2001 and 2002. Between 1996 and 2002, as a result of these various practices, Tyco made false and misleading statements or omissions in its filings with the Commission and its public statements to investors and analysts. The proposed final judgment also orders Tyco to pay $1 in disgorgement and a $50 million civil penalty. The penalty amount, which was provisionally negotiated in 2005, was reviewed and approved by the Commission in light of the considerations set forth in
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