Peregrine Systems Fraud Essay example -- Business Case Studies Account

peregrine falcon Systems Accounting FraudWall Streets call for for high growth motivated wandering Systems executives, to fraudulently inflate revenues and origination prices. According to the SEC, Peregrine filed materially incorrect financial statements with the commission for 11 consecutive quarters. Steven Spitzer, a member of Peregrines sales team admitted to meeting regularly with senior counsel near the end of the quarter to determine how more than revenue was needed to exceed Wall Streets expectations. The primary fraud connected by Peregrine was done by inflating revenue by participation revenue when sales neer occurred. By recognizing revenue from sales that never occurred, the accounts receivable parallelism and net income were fraudulently overstated the accounts receivable would never be collected, because the merchandise was never sold. To cover up their high, outstanding, accounts receivable balance as a result of booking sales that did not occur, Peregr ine fraudulently engaged in financial agreements with banks. Evidently, Peregrine Systems increased its revenues by pressuring distributors and resellers to build up their inventories (known as parking their inventory). Through secret side or oral agreements Peregrine distributors and resellers were not obligated to pay Peregrine for their parcel inventories. This conduct obviously became a problem. If they could not sell Peregrines software, they would possess their money back. According to GAAP, revenue recognition on the sale of software requires evidence that an arrangement moldiness exist, delivery must have occurred, vendors fees must be fixed or determinable, and collectibility must be probable originally recognizing revenue. Peregrine falsely recorded this tra... ... tempted to falsely inflate earnings is to analyse away their face-to-face gains, if the companys stocks go up. I believe that when upper take management has too much incentive based on personal financial gain, which is directly based on the performance of the company it compromises their judgments. I think that upper level management should not be allowed to put one across stock options or to even own stock in the company as the financial statements would provide a neutral, bias-free report. Management would have no reason to cook the books. I also feel that any management who still decides to falsify documents needs to be held more accountable for their actions and obtain tougher punishments. I think that these strict guidelines would help the people in the fall in States and people all over the world feel more reassured in investing their money into the stock market.