The paper "The Economic Implications of Corporate Financing Reporting" is a wonderful example of an assignment on finance and accounting. During his tenure as the Head of sales globally for the Computer Associates, Richard’ s actions can be said to be very serious accounting malpractices that could be challenged by the General Acceptable Accounting Principles (GAAP). His conduct to procure and fix the extension of the fiscal quarters permitted the colleagues in his docket to acquire the contracts even after the quarter-end and conspired to withhold this information not letting the accounting and finance department have the knowledge that the contracts probably have been backdated.
His misreporting had massive affects earnings and revenues at the period, particularly between the 2000 and 2001 fiscal years. This is both unethical and gross misconduct in the profession. ( Wall Street Journal, May 7, 2000) If Computer Associates achieved the same financial results with ‘ allowed accounting flexibility’ my opinion would still hold, that ethics and good practises in business must be upheld at all cost, acts of fraud and conspiracy are short-lived. Richard had good intentions of achieving his targets, but acts were interfering with the CA, s revenue. Question2. Leaders or senior managers are the most powerful and significant influence on the organizational culture and have the duty of bringing trust credibility.
Its well knows phenomena that the majority of employees would be more productive when they discharging duties that they believe in. Picconi and Hribar, (2000). There is a lot that work requires than what is generally assumed. There is an ideal chance for leaders in an organization to appeal high than just seeking for the material rewards.
Leaders who are great bring meaning and not simply money. The very type of ethical code occurs in the accounting profession because it’ s a framework of public service. Despite this, accountants normally find themselves got into serious ethical problems, there come moments when their bosses and their employers collude and request them to alter or twist the company’ s financial position perhaps because the year is perceived to have been a bad one. The assumption is usually that this will be covered in the next coming months when the organization will be making profits and the deficits be settled as quickly as possible.
This usually leaves the accountants perplexed of what to do, whether to show loyalty to the organization that got them the job or to stick with their professional ethics and this is what is generally referred to as the ‘ gray areas of accounting’ . I agree with Richard’ s sentiment when he describes the operations in the ‘ grey areas of accounting’ as not easy and asked for guidance for the top-notch management. Of course, there was immense pressure and there were targets to be achieved.
Computer Associates sales strategy for the last quarter contracts singing where they were giving discounts to customers were committed in contracts at this time of were faulted by some consultancy firms who purportedly advised their clients to be reluctant in CA deals until such a time when they will enjoy great discounts and as a result, many orders were indeed coming during this period and their revenues could not be reflected in that quarter and the chance was that the targets might not be met, therefore as the Head of sales he definitely faced the challenge and he had to pursue a solution to counter this.
His idea to aid and perhaps facilitating fellow colleagues to backdate the contract so that they actually fit within the ideal fiscal dates was not a really culpable act because it was not intended to doctor the financial results and to deliberately present cooked figures to the Board, No because the sales had been prequalified and it was only an issue of timing otherwise all these deals would still come to CA.
The operations under such ‘ gray areas of accounting’ is difficult because of the trust and ethical concerns, whether to asked for guidelines from his seniors to share the knowledge of what is going and just to hang on to it and bear the responsibility is really had to answer. If I were in Richard’ s shoe, maybe I would have done exactly the same thing in order to meet my targets because of the pressure and because technically all these backdated contracts are real deals and no fear that they will not count towards the reconciling the accountants that were what promoted the act.
What I would have done differently is, however, to change the quarterly sales promotional discounts to perhaps better purchase incentives that would lure customers in to placing their orders at any time of the month and not necessarily waiting until when they will get big discounts from the Computer Associates and also see the possibility of making some changes in the contract document so that it would allow deals that arrive late. Berenson Alex cited in New York Times, May 21, (2001)
1. The Bank of Deutsche Equity Research, ‘Computer Associates’ November 10, 2001
2. Computer Associates press release June 4, 2001
3. Griffin Peter, 2007 ‘After Long Months’ New Zealand Herald,
4. Wells Amanda, Rising Through Ranks’, InfoTech weekly, March 2, 2001
5. Berenson Alex, ‘The Past May Haunt Computer Associates’, New York Times, May 21, 2001
6. Computer Associates, Form 8-K May 29, 2000
7. Laura Johnson, ‘Computer Associates, Latest Results and Contracts Delay’, Wall Street Journal, May 7, 2000
8. Picconi Marc and Paul Hribar, 2009. ‘Making the sense of cents’
9. Levitt Arthur, ‘ The Numbers Games’, ‘Speech at NYU center for Business and LAW, August 20, 2000
10. Graham Campbell and Rajgopal Shiva., (2005), The Economic Implications of Corporate Financing Reporting, Journal on Economics and Accounting, 30 pages 30-75
11. Douglas Skinner and Myers James.,(2006), Earnings Momentum’ Journal of Auditing, Finance and Accounting, pg 250-270