What is management override?
Management override is typically used in internal controls. It is, therefore, referred to as the potentiality of an organization’s management to control accounting records. A governance body also can effectively monitor and manage accounting reports. Management override is also used in fraud prevention. Furthermore, it is the responsibility of an organization’s management to establish fraud-related financial statements.
What is earnings management
Earnings management is an accounting technique. As a technique, it is typically used to aid in the production of financial statements considered ideal to a business. That is, the statements are supposed to present a positive overview of a company’s financial position and business activities. Earnings management is also used in the establishment of the strategies used in developing accounting rules. Besides, it is used in the development of ‘smooth’ earning financial statements instead of economic reality.
How are the two connected
Both earnings management and management override are related in various ways. That is, they both revolve around the actions of the management. They also revolve around financial statements and company earnings or financial positions. Apart from financial positions and managerial activities, both management override and earnings management focus on credibility of a company’s financial information and transactions. It is, therefore, necessary to conclude that the two are connected as they both focus on the financial information of an organization.
Review the following article http://www.fraud-magazine.com/article.aspx?id=4294968448
And answer the following “Is earnings management always illegal? If not, in what circumstances can it be legal?”
Earnings management is not always illegal. That is, there are circumstances when it is allowed by the GAAP or the Generally Accepted Accounting Principles. According to the GAAP, an accountant is allowed to pick from suitable methods when calculating financial measures, including earnings. Even though earnings management is allowed, it should only be used under specific circumstances. Some of the circumstances include inventory obsolescence recording and record for appearance and not reality. It is also recommended when changing reported earnings by performance timing.
Identify a case of fraudulent financial reporting that led to a prosecution from the below link:
Name of the company
The company name is New Jersey-based blue-chip Swiss security systems
Who was prosecuted, and what for?
The prosecuted people are the company CEO, Dennis Kozlowski, and the company’s former CFO Mark Swartz, for stealing $150 million and inflating the company’s income by $500 million.
Guilty or not guilty and sentence if any, and
Both Dennis Kozlowski and Mark Swartz were found guilty and sentenced to 8-25 years in prison, and Tyco was forced by a class-action lawsuit to pay $2.92 billion to investors.
Explain briefly the “earnings management” techniques that were used
The earnings management technique that was used by the company is known as inflation. That is, both the CEO and the former CFO used inflation of income to ensure that a smooth financial statement is achieved regardless of the gap. Inflating the company’s income to $500 million was used to change the company’s financial appearance even after a fraud. The technique was therefore used to present a consistent-profit statement to produce short-term earning. All in all, there are higher chances; an accounting policy was used to manipulate the statement.
Answer the questions below using the following link
http://psc-cuny.org/clarion/may-2013/cunyfirst-users-last
- You and CUNYfirst
From an accounting perspective, what are you in CUNYfirst?
From an accounting perspective, I am the customer or buyer, giving revenue to CUNYfirst.
When you look at your billing and payments record, what kind of subsidiary ledger are you looking at?
Accounts Payable Ledger as it is my responsibility to pay and enroll for the CUNYfirst services as a customer.
When you (or financial aid) pay your fees what records and accounts are likely to be updated?
The book of accounts is more likely to be updated. However, when cash is paid, it would be debited as accounts receivable is credited.
How does CUNYfirst apply credit control over your account?
Credit control is applied through the use of interest payable if the EMI option of payment is used. It also uses its formed policy, which is issuing both P-CARDS and T-CARDS for various transactions.
What controls can you identify to make sure that your records are accurate in CUNYfirst?
To ensure that the information provided in the records is accurate, one should frequently check and verify the account.
Samples don't inspire you? Check out our essay writing help and get an essay according to your requirements!
References
Accounting Degree Review (n.d). The 10 Worst Corporate Accounting Scandals of All Time. Retrieved from http://www.accounting-degree.org/scandals/
Clarion (2013). What is your experience with CUNYfirst? Retrieved from http://psc-cuny.org/clarion/may-2013/cunyfirst-users-last
Fraud Magazine (n.d). Earnings Management. Retrieved from http://www.fraud-magazine.com/article.aspx?id=4294968448
