CHAPTER 14 CRIMINAL LAW 437 A MANAGER\'s DILEMMA: PUTTING IT INTO PRACTICE FROM
ID: 433677 • Letter: C
Question
CHAPTER 14 CRIMINAL LAW 437 A MANAGER's DILEMMA: PUTTING IT INTO PRACTICE FROM COOKIE-JAR RESERVES TO BOOKING SALES OF "BUGGY” SOFTWARE You are the chief financial officer of X-Ray Corporation, the largest subsidiary of Medtech Incorporated, a publicly traded medical-imaging firm. When you report to Medtech's CEO in the software for its new suite of imaging equipment. that X-Ray had better-than-expected earnings for the quarter ended September 30, 2014, the CEO asks you to "hold some book sales in the quarter ending September 30, 2014 of them back" as a cushion in case other subsidiaries report that would not actually be finalized until October 2014, lower-than-expected earnings in future quarters. How would which is when X-Ray's engineers predict that the bugs you respond? Suppose you tell the CEO that you cannot will be worke Now suppose instead that X-Ray Corporation had lower-than-expected earnings due to unforeseen bugs How would you respond to a request from the CEO to d out?92 comply with the request because this "cookie-jar reserve" would violate Generally Accepted Accounting Principles, but the CEO warns that failure to create the reserve would be a 192. This feature is based, in part, on a scenario described in Carol J.Loomis, career-limiting move. What would you do? Lie, Damned Lies, and Managed Earnings, FORTUNE, Aug, 2. 1999, at 92. INSIDE STORY Fighting CvbercrimeExplanation / Answer
THOUGH THE CEO IS NOT WRONG ABUT PROVIDING A COUSHION FOR ANY FURTHER DAMAGE IN THE FUTURE BUT SHOWING LOWER EARNINGS WOULD PRROVE TP BE A VIOLATION OF GAAP AS IT CLEARLY STAETES THAT THE COMPANY MUST BE HONEST IN THIER DEALINGS WITH THE PUBLIC ,CEO HAS NOT FOLLOWED THE RULES ESTABLISHED TO BE WORKED BY AND ALSO GIVEN US A WARNING THAT IF WE DONT DO IT ,IT MIGHT AFFECT MY CARRER SO WE HAVE SHOULD DO WHATS RIGHT AND COMPLAIN TO THE RIGHT AUTHOURITIES AND LET THEM TAKE THE NECESAARY ACTION
SINCE HERE THE CEO HAS PUT US TO THE TAKS OF ALTERING THE BOOKS OF ACCOUNTS HENCE AGAIN A VIOLATION OF HONEST DEALINGS ,SINCE WE ARE WOKRING IN A QUATER BASED OPERATION WE CANNNOT REALLY CHANGE THE BOOKS OF ACCOUNTS OTHER WISE WELL RISK GETTING AUDITED SO WE HAVE TO SAY NO TO THIS ORDER/REQUEST
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