2 February 2017

The SEC claimed that despite the company’s claims that it had seen over 30% sales growth in fiscal 2002, ClearOne had, in fact, experienced no sales rowth. Does the financial statement data presented, in light of your answer to question 2, support that claim? Why or why not? Yes, the financial statement data presented in question 2 supports my claim based on ClearOne stuffing the distribution scheme.

The channel stuffing overstated the revenue which was mainly caused due to the activity that took place at the end of the quarter. The high A/R balance raises a huge red flag when comparing to prior years.The Sarbanes Oxley Act was implemented to prevent companies from falsifying their financials while holding their upper management personally liable for what is reported to the IRS. 5. Comment on any other interesting or relevant items you can gather from the financial statement data related to the SEC’s allegation. What I find to be interesting is that according to the SEC, by the end of June 2002, approximately 50% of the revenue claimed by ClearOne was a result of stuffing. The A/R in 2002 was $20+ million and 2 years prior the A/R was approximately only $4 million.

Accounting Essay Example

An auditor would question these numbers since the accounts receivable balance was so high and upon further investigations, they would find that majority of the transactions were listed 2 weeks prior to year end. After reading more about the case, I found it interesting that they reported that the sales revenue went up over 30% in 2002, when in fact it did not go up at all. I would assume that possibly upper management works on bonus’ or had some greater incentive to continue manipulating/falsifying their transactions.

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