The case I will be discussing is the fraudulent revenue recognition
done by FTE Networks, Inc., a holding and investment company that
specializes in real estate. The Company’s revenue was inflated by as
much as 108% by shifting their revenue earned by sales into future
periods in an effort to mitigate their less than stellar performance
related to projections (Third Former Executive of
Telecommunications company Charged in Scheme to Defraud
Investors, 2022).
The “revenue recognition” technique clearly applies to this case due
to the nature of the fraudulent activity. FTE Networks, Inc. attempted
to boost their earnings and mislead investors by manipulating the
recognition of their revenue (Levitt, 1998). The Company delayed
shipments from customer purchases in order to shift the revenue into
underperforming future periods, so the revenue was fraudulently and
incorrectly recognized (Third Former Executive of
Telecommunications company Charged in Scheme to Defraud
Investors, 2022).
Reference List:
Levitt, A. (1998, September 28). Remarks. U.S. Securities And
Exchange Commission. Retrieved October 11, 2022, from
https://www.sec.gov/news/speech/speecharchive/1998/spch220.tx
t
Third Former Executive Of Telecommunications Company Charged In.
(2022, June 2). Retrieved September 12, 2022, from
https://www.justice.gov/usao-sdny/pr/third-former-executive-
telecommunications-company-charged-scheme-defraud-
investors#:%7E:text=This%20fraudulent%20revenue%20included%2
0more,never%20provided%20any%20such%20services.
