CFO in Trouble
Some companies resort to showing positive balance sheets in order to keep their goodwill and retain the confidence of investors in their company. Although, this is punishable yet companies keep offending and breaking the rules.
The Securities and Exchange Commission has levied charges against the CFO of a United States anti-aging skin care retailer. It has been reported by the SEC that the company showed a false balance sheet report. In a bid to enhance the profits of the company and to attract market, it had included the sales of products in the balance sheet which were still lying unsold in the warehouse.
Karl Redekopp who is the former CFO of ICTV had projected losses of million dollars as profits by showing the sales of unsold products. International Commercial Television sales of a skin care appliance called Derma Wand was falsely accounted by the company. This product is used for reducing wrinkles and improves skin texture.
It is reported that Home Shopping Network was marketing the product and Karl Redekopp was accounting the revenue of products before they were actually sold or delivered to the viewers ordering them. It has also been stated that the CFO also was taking into account the revenue for the free trial period offered by the company. Moreover, the revenue entered for the products whose orders were cancelled or the products which were returned was not reversed. All these discrepancies led to false revenue being projected by the company in 2007 and 2008.
Administrative proceedings against Miami based firm, Company CPAs, and external auditors Steven Dohan and Nancy brown has begun. They have all been charged for professional misconduct. They have been charged for not identifying the violations of GAAP. The remedial sanctions will be determined in an administrative hearing scheduled shortly.