Read Major Case Study 3: MicroStrategy, Inc. on page 556 of your text.

In six to eight pages, supported by evidence from your text and from other research (at least two resources are required), answer the following questions:

• Evaluate the accounting decisions made by MicroStrategy from an earnings management perspective. What was the company trying to accomplish through the use of these accounting techniques? How did its decisions lead the company down the proverbial “ethical slippery slope?”
• What motivated MicroStrategy and its management to engage in this fraud? Use the pressure and incentive side of the fraud triangle to help in answering the question. How would you characterize the company’s actions in this regard with respect to ethical behavior, including a consideration of Kohlberg’s stages of moral development?
• Why is independence considered to be the bedrock of auditor responsibilities? Do you believe PwC and its professionals violated independence requirements in the AICPA Code of Professional Conduct? Why or why not? Include in your discussion any threats to independence that existed.
•  

You must proofread your paper. But do not strictly rely on your computer’s spell-checker and grammar-checker; failure to do so indicates a lack of effort on your part and you can expect your grade to suffer accordingly. Papers with numerous misspelled words and grammatical mistakes will be penalized. Read over your paper – in silence and then aloud – before handing it in and make corrections as necessary. Often it is advantageous to have a friend proofread your paper for obvious errors. Handwritten corrections are preferable to uncorrected mistakes.

Use a standard 10 to 12 point (10 to 12 characters per inch) typeface. Smaller or compressed type and papers with small margins or single-spacing are hard to read. It is better to let your essay run over the recommended number of pages than to try to compress it into fewer pages.

Likewise, large type, large margins, large indentations, triple-spacing, increased leading (space between lines), increased kerning (space between letters), and any other such attempts at “padding” to increase the length of a paper are unacceptable, wasteful of trees, and will not fool your professor.

The paper must be neatly formatted, double-spaced with a one-inch margin on the top, bottom, and sides of each page. When submitting hard copy, be sure to use white paper and print out using dark ink. If it is hard to read your essay, it will also be hard to follow your argument.

ADDITIONAL INFORMATION;

Accounting Ethics

Introduction

The field of accounting is a highly regulated profession that requires strict adherence to ethical standards. Accounting ethics violations can lead to a variety of legal issues, including fraud charges and termination from employment. It’s important for professionals in this field to understand the basics of accounting ethics so they can avoid making mistakes and keep their careers intact.

Ethics in accounting

The principles of accounting ethics are a set of moral principles that guide the professional practices of accountants. Accounting ethics are often considered to be a subset of business ethics, but some professionals make a distinction between accounting and business ethics.

Accounting ethics violations

Accounting ethics is a set of ethical standards that apply to the practice of accounting. It is the study of the moral principles that guide accountants in their professional activities and it concerns itself with the application of moral principles to professional practice.

Accounting ethics standards have been developed since ancient times by writers such as Aristotle, who taught that “morality consists in doing what is right.” The first formalized definition of accounting ethics was given by John C. Welch (President Emeritus, General Motors Corporation) in his book Ethics for Accountants: How To Make a Difference: “Accounting has never been considered an exact science until recently; it’s always remained more subjective than objective.”

Falsifying financial documents

If you are found to have falsified financial documents, it is a crime. Falsifying financial documents is a felony and can be punished by up to five years in prison or even more if there are aggravating circumstances involved.

Falsifying financial documents is one of the most serious offenses that can be committed by an employee or a company because not only does it damage their reputation but also puts them at risk of being sued by people who have been defrauded as well as having their assets seized by government agencies such as the IRS (Internal Revenue Service).

Fabricating invoices

Invoice fraud is a form of accounting fraud. It involves creating fraudulent invoices and false claims for payment, which can be used to increase revenue or decrease it. The crime may take place at the company level, but it also occurs on an individual level in some cases.

Accounting firms that have been involved in invoice fraud have been fined by government agencies such as the SEC (Securities and Exchange Commission). In fact, these fines are often large enough that they could cause serious financial damage if not paid back within 30 days from when they were issued by authorities such as these ones – especially since they’re often handed down by courts rather than simply being handed down by companies themselves!

Providing misleading financial reports

Providing misleading financial reports is a serious violation of accounting ethics. Financial reports are used by investors, creditors and other stakeholders to assess the financial condition of a company. Inaccurate or incomplete financial reports can have significant impacts on the value of your company’s shares.

Financial statements should be accurate and complete, but they may not be if you fail to provide all information required by your auditors or regulators (e.g., if they ask for it). If you don’t follow these requirements carefully, then your audit could result in an enforcement action against you; there are fines and penalties associated with providing misleading information that would not otherwise be required by law (e.g., Securities Exchange Commission regulations).

Inflating inventory listings

Inventory is the most common asset in most businesses. It can be used to increase profits and even make a profit on its own, but it’s important for companies to keep track of their inventories and make sure they’re not overstating how much product is available or how many units have been sold.

Inflating inventory listings occurs when you add items that don’t exist (e.g., “we have 1 million units available”) or understate how many units are actually left (e.g., “we only have 500 left”). Overstating the value of inventory is also common; this means reporting higher values than what should actually be true based on actual sales data collected by your company’s suppliers or customers themselves–for example, if someone buys 100 widgets at $1 each instead of 99 widgets at $0.99 each, then those 100 widgets would count as having been sold even though no money changed hands between buyer and seller!

Deliberately reducing inventory counts

Inventory counts are used to calculate profits. If you have a large inventory count and no sales, then you’re probably not making much money. A company with an inventory count of $1 million but no sales will report a loss for that quarter.

If a business reduces its inventory count by an unusually high amount (or even if it doesn’t), it can make it look like the company made more money than it actually did during the accounting period which could be misleading to investors or other stakeholders when determining whether or not to invest in your company’s stock. This practice has been called “fictitious sales.” For example:

• A retailer buys all of its products at wholesale prices from vendors who have excess stock they don’t need anymore so that they can sell the excess at lower cost later on down the road; but instead of selling those items later on down the road when consumers actually need them now instead of saving up for future purchases—the retailer does nothing until after all those shoppers have gone home without buying anything new!

Recording false transactions

This is unethical for several reasons. First, it can lead to the loss of a client’s trust and confidence in your company. Second, you may be charged with fraud and have your employment terminated if caught engaging in false transactions with clients or customers. Third, there are legal consequences if found guilty of violating accounting rules and regulations (see below).

Secretly making payments to obtain business benefits

• Paying bribes: This is the act of giving money or gifts to government officials in exchange for preferential treatment.

• Paying kickbacks: The practice of paying a percentage of the value of goods sold to a supplier in order to obtain his or her business.

• Paying for services that are not provided: An employer who does not provide adequate benefits to employees may be guilty of this crime by providing them with less than what’s legally required under labor laws and other regulations.

• Making payments for services that aren’t needed: If an employee feels he or she doesn’t need something from his or her employer, then it’s probably because someone else has already offered him/her something similar for free (like vacation days). That’s illegal! So don’t do it!

Conclusion

The most important thing is to make sure that you are doing everything in your power to protect the integrity of your company. It’s also important to remember that any dishonest behavior could result in serious consequences, including criminal charges and fines.