we have discussed the many ways, accounting fraud can be commited . Amongst CEO/senior official and CEO/senior official of another company, “club-call” can be made to exchange revenue or so-called “revenue swap” namely by selling and buying with each other. The ultimate purpose is to artificially inflate the revenues generally or for a certain purpose e.g. for IPO purpose.We also notice that many accounting fraud occur due to the blatant attitude of top management to disregard the importance of “accounting cut-off” whether on a quarterly or yearly basis.

The following Computer Associate’s case is one good illustration of the abovesaid occurence:

Sanjay Kumar, the ex-CEO and co-defendant Stephen Richards, ex-worldwide sales head of Computer Associates International Inc., pleaded guilty to financial fraud charges when they appeared in federal court in Brooklyn, N.Y. Also, several former CA executives have already pleaded guilty to related charges. CA, which changed its name from Computer Associates International Inc. to CA Inc. in the wake of the fraud charges, was forced to pay $225 million to compensate victims.
Apparently, the indictment were as follows:

• Sanjay was so inclined to increase its quarter revenue that in July 1999, he flewed in the company’s corporate jet plane to Paris to secure a contract of 19million which he subsequently back-dated it,
• In early 2000, CA signed a $44.5 million license deal with a “nearly insolvent” customer in which it also had an ownership stake. It then back-dated the contract so it could be recorded in the prior quarter. In the next quarter, expecting that it would not be able to collect on the contract, CA reversed the revenue in its internal records but did not publicly restate its results.

• authorizing a $3.7 million consulting contract in early 2003 that essentially amounted to hush money for an unnamed executive at a CA customer company. This executive had arranged a $27 million license contract with CA in March 2000, but as part of the deal, CA spent a similar amount on software from the executive’s company. Neither software package was ever used, making the deal a “revenue swap” that can’t legally be treated as a sale.

• Also, revealed was “CA’s culture” of the “35-days period cut-off (instead of normal 30 days period) where senior executives asked their salespeople to clean up their act by securing the contracts and removing away the time-stamp date of the faxes.