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An Overview of ETHICS
“The above all: to thine own self be true, and it must follow, as the night the day, thou canst not then be false to any man.”
―Polonius, a character in Shakespeare’s Hamlet, discussing the importance of moral integrity with his son, Laertes.
The Enron financial debacle in the latter half of 2001 thrust corporate accounting and auditing into the spotlight, subsequently bringing closer attention to other companies that have been forced to issue restatement of previous earning reports. One such company is Peregrine System, a San Diego firm that develops software for businesses to track their assets, such as IT equipment and fleets of vehicle.
On May 5, 2002, the firm announced that its board of directors had authorized an internal into potential accounting inaccuracies uncovered by its KPMG auditors. Based on preliminary information, certain transactions that involved revenue recognition irregularities amounting to $100 million—one-fifth of the firm’s 2001 revenue—were called into question. Additionally, the board announced the resignation of its chairman of the board, chief executive officer, and chief financial officer. Peregrine’s stock plummeted to $.89—a huge markdown from its split-adjusted high of $79.50 in Mach 2000. A firm that Business Week named one of the 100 best performing IT companies for 2001 and whose customers include 92 percent of the Fortune 500 companies had fallen on hard times.
Some of the company’s investors wondered how revenue could have been overstated. Actually, there are many different and legal ways companies can report revenue figures. However, investors tend to sue first and look for facts later—more than a dozen of class—action shareholder lawsuits were filed against the company.
Adapted from Chris Gaither, “Peregrine Shares Hit Skids on Disclosure of an Audit,” The New York Times on the Web, May 7, 2002, accessed at www.nyties.com; “Peregrine Systems Announces Internal
“The above all: to thine own self be true, and it must follow, as the night the day, thou canst not then be false to any man.”
―Polonius, a character in Shakespeare’s Hamlet, discussing the importance of moral integrity with his son, Laertes.
The Enron financial debacle in the latter half of 2001 thrust corporate accounting and auditing into the spotlight, subsequently bringing closer attention to other companies that have been forced to issue restatement of previous earning reports. One such company is Peregrine System, a San Diego firm that develops software for businesses to track their assets, such as IT equipment and fleets of vehicle.
On May 5, 2002, the firm announced that its board of directors had authorized an internal into potential accounting inaccuracies uncovered by its KPMG auditors. Based on preliminary information, certain transactions that involved revenue recognition irregularities amounting to $100 million—one-fifth of the firm’s 2001 revenue—were called into question. Additionally, the board announced the resignation of its chairman of the board, chief executive officer, and chief financial officer. Peregrine’s stock plummeted to $.89—a huge markdown from its split-adjusted high of $79.50 in Mach 2000. A firm that Business Week named one of the 100 best performing IT companies for 2001 and whose customers include 92 percent of the Fortune 500 companies had fallen on hard times.
Some of the company’s investors wondered how revenue could have been overstated. Actually, there are many different and legal ways companies can report revenue figures. However, investors tend to sue first and look for facts later—more than a dozen of class—action shareholder lawsuits were filed against the company.
Adapted from Chris Gaither, “Peregrine Shares Hit Skids on Disclosure of an Audit,” The New York Times on the Web, May 7, 2002, accessed at www.nyties.com; “Peregrine Systems Announces Internal