1. FORENSIC ACCOUNTING - BA124 - Fall 2005Slide 16-1 Today’s Topics n Shenanigan #6 n World’s Dumbest Fraudsters

2. FORENSIC ACCOUNTING - BA124 - Fall 2005Slide 16-2 Shenanigan #6 n Shifting revenue to a future period n Why would we want to do this? n What is the benefit? n Fraud vulnerability charting of this fraud

3. FORENSIC ACCOUNTING - BA124 - Fall 2005Slide 16-3 Why Do It? n Reserves for a “rainy day” n Investor benefit post merger

4. FORENSIC ACCOUNTING - BA124 - Fall 2005Slide 16-4 Techniques n Creation of “cookie jar” reserves n Revenue hold back before an acquisition

5. FORENSIC ACCOUNTING - BA124 - Fall 2005Slide 16-5 “Cookie Jar” Reserves n W.R. Grace, Heinz & MSFT examples n Warning signs n Excessive use of reserves n Post-dating of shipping documents n Smoothing income…flat-line even (Stryker)

6. FORENSIC ACCOUNTING - BA124 - Fall 2005Slide 16-6 Revenue Holdback n Tyco and Medaphis n Hold back revenue today n Reverse it into income after the acquisition

7. FORENSIC ACCOUNTING - BA124 - Fall 2005Slide 16-7 World’s Dumbest Fraudsters n Dorothy Livingston and the $1 million bill n Kevin Jackson and the $100 million bond n “Reality Perspective Bank” n Sam’s hat-trick n Who’s ethics? n Cameron’s fast track fraud n Dewey, Cheatem & Howe n Ebay on the highway n Brotherly love…paying for hard time n Walking away from debt…how desperate is this? n Cone head justice