Case Solution for The Midnight Journal Entry

Complete Case details are given below :
Case Name :      The Midnight Journal Entry
Authors :           Anne T. Lawrence
Source :             North American Case Research Association (NACRA)
Case ID :            NA0180
Discipline :        Business Ethics
Case Length :    10 pages
Solution sample availability : YES
Plagiarism : NO (100% Original work)
Description for case is given below :
How should a chief financial officer respond when he uncovers a serious accounting fraud? Richard Okumoto, the newly-appointed CFO of Electro Scientific Industries, Inc., learned that around midnight several months earlier, a group of managers, led by a man who later became CEO, had reversed an accrued liability associated with the anticipated cost of employee retirement benefits. This “midnight journal entry” had allowed the company to report a gain, rather than a loss, for the quarter. Okumoto believed that the reversal was improper and the company’s earnings should be restated. When he approached the CEO, the general counsel, and the audit committee with his concerns, however, he was told to “just get past it.” Okumoto had to decide how best to act on his conviction that the company had committed an unethical and illegal act, while minimizing the risk to himself and his future career prospects.

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