NEWSWIRE - April 9, 2001
Topic: Financial Statements, Cash Flow, and Taxes
Source: "Xerox Delays Annual Report in Dispute with
its Auditor Over Accounting Issues," by James Bandler, Wall
Street Journal, Tuesday, April 3, 2001, page A3; and "P&G's
One-Time Charges Make Critics Look Twice at Earnings," by
Emily Nelson, Wall Street Journal, Wednesday, April 4, 2001,
page C1
Synopsis of Article: It's corporate earnings season,
as many companies release their annual reports and first quarter
earnings. These two articles highlight issues around accounting
for earnings and releasing financial information to the capital
markets. The Xerox article discusses Xerox's recent delay
in filing its annual report with the SEC, due to a disagreement
with its auditor (KPMG) over accounting issues. The Proctor
and Gamble article discusses P&Gs use of one-time charges
to write off restructuring costs. P&G has taken these charges
against earnings for the past seven quarters, prompting analysts
to evaluate their earnings more carefully. The articles provide
an opportunity to discuss accounting for earnings, the role
of the outside auditor, and how financial markets interpret
accounting data.
Questions:
- The SEC has recently been concerned with the quality of
accounting earnings released by companies. What are the
main issues surrounding the quality of earnings for Xerox
and P&G?
- In Xerox's case, what is KPMG's responsibility in dealing
with fraud?
- How do the accounting issues faced by Xerox and P&G impact
their stock prices?
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