Exam 7: Earnings Management and the Quality of Financial Reporting

Assume you were in Sherron Watkins' position and you informed Ken Lay that the company might implode as a result of the accounting scandal. After an investigation by the lawyers who said there was nothing to worry about, Lay told you he would take no steps to act on your concerns. Use the relevant elements of the decision making model described in chapter 2 including stakeholder and ethical considerations and decide on a course of action for Watkins.

Many of the cases discussed in the chapter address the issue of swap transactions. What is a swap transaction? What criteria should be used to determine how and when to record revenue on swap transactions? Describe the facts of any one case in the book with respect to proper recording for revenue in swap transactions.

The expression, "Too many corporate managers, auditors, and analysts are participants in a game of nods and winks" is attributable to:

"Cookie jar reserves" can best be described as:

In the Matrixx Initiatives v. Siracusano case, the Supreme Court adopted the position about materiality that