This case study deals with the financial accounting fraud at Sunbeam Corporation during the time “Chainsaw” Al Dunlap was the company’s CEO. This was a very pervasive fraud, involving improper revenue recognition, understatements of the reserves for sales returns and bad debts, abuse of the rules governing consignment sales, and other manipulations. While the amounts involved seem insignificant when compared to those of Enron and WorldCom, the study of Sunbeam is illuminating. Many of the problems at Sunbeam were caused by an abusive and egotistical CEO. In addition, Sunbeam’s external auditor during the period of the fraud was Arthur Andersen. Sunbeam can be viewed as being part of a continuum of audit failures extending from Waste Management to WorldCom. This case is designed in part to serve as an antidote to the coverage found in typical accounting by exposing students to a real situation in which people knowingly violated GAAP, and still received a clean audit opinion, and the company was eventually forced to declare bankruptcy.
Cherry, A. (2004), "SUNBEAM CORPORATION CASE: “BILL AND HOLD SALES, CHANNEL STUFFING, AND LOTS OF RETURNS: THE EFFECTS ON REVENUE, INVENTORIES, AND RECEIVABLES”", Lehman, C., Tinker, T., Merino, B. and Neimark, M. (Ed.) Re-Inventing Realities (Advances in Public Interest Accounting, Vol. 10), Emerald Group Publishing Limited, Bingley, pp. 63-81. https://doi.org/10.1016/S1041-7060(04)10004-7Download as .RIS
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