Accounting discussion broad

Counting the lecture this week we've gone over 3-4 different costing methods as well as several inventory valuation methods...and everyone has seen how much is involved.

For this week....go out onto the web and find a company that has been "caught" reporting costs incorrectly.  This could be inventory valuation, it could be costing methods, it could be channel stuffing...

The SEC finds fault with a number of companies each year and one major source of fault are issues around matching inventory costs to revenue properly...so let's see what you can find.

Those company cannot use ..

Olympus Corp 

Penn West Petroleum

Peregrine Systems, Inc

Qwest Communications

Satyam Computer Services 

The Baptist Foundation of Arizona

The HealthSouth

Toshiba 

Trinity National Corp

Tyco Scandal (NYSE: TYC)  

Waste Management (WM)

WorldCom (MCI)  

Adelphia Communications 

American Apparel 

American Insurance Group (AIG)  

AOL Time Warner 

Bernie Madoff 

Bristol Myers Squibb

Channel Stuffing: Coca-Cola

Computer Sciences Company (CSC) 

Dell Computers  

Diamond Foods

Enron Accounting Scandal 

Freddie Mac Scandal 

Global Crossing

Goldman Sachs

Home Loan Services Soluctions, LTD

IMClone System  

Jewelry and Collectibles Company With Accounting Fraud 

Lehman Brothers  

Miller Energy Resources 

MusclePharm 

OCZ Technologies Inc

Arizona

Peregrine Systems,

Example

After my research, the company I chose this week was the HealthSouth. It is the U.S. largest publicly traded health care company. In 2003, HealthSouth met civil charges by the SEC for it presenting fraudulent and overstated financial statements. The higher authorities in HeathSouth asked its underlings to make up numbers and transaction from 1997 through 2002. 

During these years, HealthSouth’s CEO and key financial officers boosted its company’s revenue:

Firstly, instead of adhering to the matching revenue and cost principles, the company differed full revenues from prepaid health coverages. Secondly, it overvalued other revenues from healthcare coverages. Lastly, differed routine operational expenses in order to understate future inflate revenues and year’s annual expenses. 

“PricewaterhouseCoopers uncovered a total of $1.4 billion in systematically overstated income, which began from 1999. This was in addition to the $1.1 billion identified by the US Justice Department from HealthSouth officials' admissions of overstated earnings.”

HealthSouth’s CEO, Richard Scrushy, was convicted of bribing the governor of Alabama, for 7-year prison sentence. 

Source: http://www.brighthub.com/office/finance/articles/101200.aspx 

      http://www.accounting-degree.org/scandals/