Article on Accounting Scandal in Fuji Xerox Australia and New Zealand
13 Pages4182 Words59 Views
Added on 2020-06-06
Article on Accounting Scandal in Fuji Xerox Australia and New Zealand
Added on 2020-06-06
ShareRelated Documents
Review of current Accounting issues
Table of ContentsQUESTION 1...................................................................................................................................1QUESTION 2...................................................................................................................................4Outlining major issues covered in the exposure draft............................................................4An assessment to whether or not regulator behaviour can be explained by public interesttheory......................................................................................................................................5An outline of the views presented in comment letters...........................................................6An assessment as to whether the comment letters can be interpreted as being “for” or“against”.................................................................................................................................7Application of regulating theories with justification..............................................................8REFERENCES................................................................................................................................9
QUESTION 1 The article lights on accounting scandal in Fuji Xerox Australia and New Zealand, Thebusiness situation went out of hands of the organization when the top executives of Fuji Xeroxinvolved in fraudulent acts and covering up of major accounting irregularities. The subsidiarycompany's executives were marked for manipulation of accounting books and overstating ofprofits in the spam of 6 years.The company showed humongous profits of AU$ 451 million in the period of 6 yearswhich was delightedly fabricated by the managing director of entity. This report reveals thatcompany presented regular revenues in order to hit the standard targets. This was done bymanipulation of accounting books (Weygandt, 2010.). All the losses endured during the tenurewere ignored to show well presented books. MD also sold assets of organization and fabricated itas revenue to cover the falsified sales of millions.The article also reveals that executives favouring it were highly compensated withsalaries much more than the market rate, gifts, huge bonuses and expenses were born oncorporate credit cards. The executives also were allowed meals and high gage expense on thecorporate cards. It was recorded that in 10 months 3 executives spent over $50000 on dinners.The overstating of revenue on managed service agreements is the main point of thisscandal. The company showed more revenue on MSA's to report more profit in segment. TheMSA's have no lower limit on value and the pricing varies on the basis of use. Theoverstatement was covered with sale of assets being recorded in revenue to make up for thefictional revenue (Kieran, 2017). There was double recording of advanced sales in order toachieve the targets. The promotional products and donations to schools were also recorded assales to achieve the target. Further, the non operating transactions were also marked as revenuefrom sales to cover up the mistakes in accounting figures.Accounting theory, principle and concepts related to it are :Usefulness: the theory of usefulness suggests that the main purpose accounting is tocreate books and statement which provides information to the reader about the financialposition of the company (Deegan, 2013). This information is also useful in takingbusiness and economic decisions. This theory also states that the financial reporting mustalso comply with the economic, legal and social environment of the place wherecompany is operational. The theory also suggests that the accounting rules must be1
flexible so that they can be changes with the changes in environmental conditions. Thebooks and statements of Fuji Xerox were misleading and tampered. The MD of thecompany manipulated the transactions to show maximization in the revenue and the saleswas fictitious in books. The information provided by the statements was false as profitsof around 431 million dollar were falsely planted.Full disclosure: This principle states that a company show all the financial statements andtransactions which might affect the understanding of viewer. Moreover, this principlealso states that the information provided in statements is important for the stakeholders asthe judgement of organization is based on this information (Lukka, 2010). Also, thecompany is also liable to disclose any contingent events which may affect the financialposition or situation of company. Fuji Xerox violated the principle widely as allaccounting books and statements were fabricated by the company to show high amountof revenue. The organization also did not reveal the losses that were being incurred byinstitution and this showed the books clean, this followed a wrong interpretation ofcompany's position. The falsified sales revenue created high operating profits for theorganization.Realization concept: This concept states that companies must record the transaction in thebooks of accounts when revenue is realized. In other words it can be said revenue mustbe recorded only when cash has been received or right to receive cash, i.e. assurance hasbeen received from the customer (Godfrey, 2010). Fuji Xerox did not follow this rule asorganization recorded the advanced sales into books of accounts. Moreover, thetransactions were recorded twice to show more revenue. Also fictitious sales were createdby the officials of the company. These fictitious sales did not realize any amount whichviolates the principle. The fabrication was done to reach the sales target of month whichwidely desecrated the rules of accounting. Principle of reliability: The principle of reliability condemns that every transactionrecorded in the books of accounts must be evidenced with a legal and reliable document.It also suggests that the document must be authentic and should be show appropriate linksto the transaction. This principle of accounting is important to follow and is to be checkedwhile auditing the books of the institution. Fuji Xerox violated this principle widely asthe company falsified transactions in the books. These sales transaction were evidenced2
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Professional Communication Practice Doclg...
|8
|1859
|39
Audit and Control in IS/ITlg...
|6
|1960
|190
Manipulating Financial Reports by Managerslg...
|7
|1407
|350
Accounting issues in Dick Smith’s Caselg...
|6
|1249
|468
Audit Risk Assessment of GPSA Limitedlg...
|10
|1794
|413