A letter from prison

“A letter from prison”

Assignment Questions:

1. How serious were Stephen Richards’ actions? Why?

It is a very serious problem since the executives from Computer Associates performedfraudulent accountability practices. Although it seems not that serious to recognize revenue one “day earlier”, this type of practices is deemed by the SEC and is a crime.

Related to the case, theexecutives did not report nonexistent deals, these deals or contract in deed exist, the evidence found on this case suggests that the products have been delivered and that there were revenue and cash flowsassociated with these contracts, but the problem was that employees backdated these contracts in order to inflate income. According to Walter P.Shchuetze, “… some contracts appear to have been signedafter the end of the quarter in which revenues associated with such contracts had been recognized”. The employees kept the books open a few days after the end of the reporting period in order torevenues could be counted a quarter earlier than it ought to have been. They did these in order to meet the market expectations, more specifically Wall Street estimates of earnings.

In “A letter fromprison” we see that Stephen Richards explains that the result of his behavior was trigger by the pressure put by the analyst community to meet specific target and expectations, and that at this pointthere is a thin line between the legal actions and illegal actions. We can learn from this that many executives that have a huge pressure to meet expectations, sometimes are pushed to “made up numbers”and commit fraud, but the difference are made by the ones who have work ethic.

After reading this case and studied others like Enron, I must say that I do not agree with the statement made byRichards: “Richads stated he felt that there was an important difference between computer associates and other well publicized corporate scandals; Enron bankrupt, Adelphia bankrupt…. There were no shell...