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ACC-281. DQ1 Read and respond to ATC 7-7 on page 285. This situation is similar to the Enron scandal from several years ago. Use the Ashford Online Library to research Enron accounting procedures. In your post, discuss how these accounting procedures affected the company and stockholders. ATC 7-7 Corporate Governance Sometimes debt is not debt -THIS IS THE READING OUT OF THE BOOK FOR THE ASSIGNMENT SINCE David Sheridan was a well-respected CPA in his mid-fifties. After spending 10 years at a na- o tional accounting firm, he was hired by Global, Inc., a multinational corporation headquarters- tered in the United States. He patiently worked his way up to the top of Global’ s accounting per department and in the early 1990s, took over as chief financial officer for the company. As the Internet began to explode, management at Global, Inc., decided to radically change the nature of its business to one of e-commerce. Two years after the transition, Internet commerce began to slow down, and Global was in dire need of cash in order to continue operations. Manage- ment turned to the accounting department. Global, Inc., needed to borrow a substantial amount of money but couldn’t afford to in- crease the amount of liabilities on the balance sheet for fear of the stock price dropping and banks becoming nervous and demanding repayment of existing loans. David discovered a way that would allow the company to raise the needed cash to continue operations without having to report the long-term notes payable on the balance sheet. Under an obscure rule, companies can set up separate legal organizations that do not have to be reported on the parent company’s financial statements, if a third party contributes just 3 percent of the start-up capital. David called a friend, Brian Johnson, and asked him to participate in a business venture with Global. Brian agreed, and created a special purpose entity with Global named BrianCo. For his par- ticipation, Brian was awarded a…
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