Critical Thinking Case - Essay Example | Topics and Well Written Essays - 750 words

Critical Thinking Case - - Essay ExampleThe company should ensure its financial reports abide by the GAAP.The Microsoft Corp may contrive violated the rules and regulations of the security and exchange commission. Microsoft documented keeps minus a properly substantiated or recorded basis. The SEC noticed that from the year 1995 to 1998, the company retained secret liability, allowances, accruals, and reserves accounts that are termed as reserve accounts or reserves by the SEC. These undisclosed accounts stretched from $200 million to $900 million on quarter-end in the movement of those 4years. At the operational level, regional controllers upheld reserve accounts in conformity with the accepted accounting principles and were correctly documented and reviewed systematically by the internal audit department of Microsoft Corp. However, at the high-ranking company level, the journal entries were carried out to several reserve accounts without applying accurately based statistics, a nalysis or formulas. Additionally, there was minimal or no recording to support the alterations to these reserve accounts. The main justification was founded upon the decision of the probability of forthcoming events. Therefore, these reserves lacked the needed documentation as required by the subject field securities statute and did not have sufficient substantiation as speculated in GAAP (Sandretto, 57).Microsoft Corp was not doing the right thing as all the reserve accounts were not being maintained according to the GAAP, and they were not reviewed accordingly with the companys internal audit department. Additionally, the documentation and changes depended on subjective judgments instead of actual analysis and statistics. Furthermore, the actions of only maintaining some reserve accounts and having others undisclosed are termed as fraud, and this affects the companys profitability. Therefore, the company should make sure there are no undisclosed accounts and all