Writing Assignment (Why did we manage earnings?)
You are the controller for Cam Ry Industries. Your company has recently received a large amount of unfavorable publicity because an SEC investigation uncovered a systematic 2 year effort by Cam Ry’s management to manipulate reported earnings. The primary motivation for this earnings management scheme was to consistently meet analysts’ earnings expectations in order to keep the opinion of your company high in advance of an additional share offering that was to take place next year. The SEC has now formally sanctioned your company and fined it $350,000, and the investor backlash has lowered the company’s share price and resulted in the cancellation of the planned share offering next year. As controller, you were aware of the earnings management scheme. You failed to actively oppose the effort. However, the Dr. iving force behind the scheme was the former chief executive officer (CEO) who has now been replaced. Your former auditor has also been fired. The new CEO is attempting to mend all of the stakeholder relationships that have been strained because of the SEC revelation of the earnings management activity. The new CEO has assigned you to repair relations with Yosef Bank. The bank has provided a line of credit to Cam Ry for over 15 years. You have personally represented Cam Ry in its dealings with the bank. For the past 5 years, you have met frequently with Dee Ann Martinez who is a senior vice president with the bank and the person assigned to the Cam Ry account. Through mutual friends, you have heard that Martinez feels personally betrayed by you and no longer trusts you. You are scheduled to meet with Dee Ann Martinez next week to discuss Cam Ry’s line of credit. In advance of that meeting, you have decided to write a 1 page memo to Martinez in an attempt to mend your relationship. Write a Dr. aft of that memo.