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Don Russell FINAL

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by

Laxitha K

on 21 March 2016

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Transcript of Don Russell FINAL

Previous Career: C&S Overview
Issues with C&S
Current: ETI Overview
Users/Stakeholders
Analysis of Issues
Conclusion
Contributions
- Don Russell
- President & Management
- Shareholders
- Auditors
- NTC
- Earnings management
(manipulation of numbers)
- No comparable data
- Bad reputation
- Creates a game playing culture
- Potential fraud

- Rapidly growing public communications service company

- Manual processes and many legacy systems

- Did not have the resources needed to cover capital costs for expansion

- National Telephone Corporation (NTC) wanted to acquire ETI

- NTC offered to buy ETI's stock at a large premium over market prices

CFO at Eastern Technology
Don Russell
Aggressive Accounting Practices
Corporate Ethics
HIRED
or
FIRED

Special Guest: Don Russell
Previous: Controller at C&S
- manual
- expenses accrued
- auditors negligent
Management Approach
- EPS
- Earnings management culture
- Unethical reporting


Set up a large reserves account

- $53 million

Recommendation
Who are the main
stakeholders
?

Name one
prominent

issue
in these companies?

What is the main reason for the strong company culture of
aggressive accounting
at the two companies?

Why are the
targets
set by the two companies
poor choices
?
What could Don do about the
aggressive accounting
strategies at ETI?

What should the
auditors
of ETI have done?
What were some
ethical issues
that arose at the two companies?
What were the long term
impacts
from
manipulation
of reserves?
Major system changes

- chart of accounts, new general ledger, AR, AP
Reduced staff
- saved company $4 million per year
- No strategy
- Only financial targets
- Culture of earnings management
Should
financial targets
be the only consideration when setting long term goals?

Would it be considered “okay” if
management directs

you
to do it?



If your superior asked you to do a similar task, would you do it?

Did Don’s
position of power
affect the use of these aggressive accounting systems?
Do you agree with the auditors choice of an
unqualified
report?
Do you think the auditors did the best to their abilities despite the gap in
technological knowledge
?
Full transcript