Question

In halliburton scandal of 1998-1999, how was collusion a part of their accouting and audit factors of failure??

Answer 1

Halliburton scandal of 1998-1999

Enforocement actions include all of the charges that the commission deemed appropriate in light of the investigative record developed by its staff. These actions conclude the commission investigation of Halliburtion's 1998 change to its accouning practice.

Halliburtion provides a wide range of industrail construction services. In providing those services, Halliburton times, incurs cost overruns; the overruns may be recovered from halliburton's customer depending on the terms of the construction contract and the nature of the overruns. Form 1993 to 1997, Halliburyton changed its historical accounting practice and began recongnizing revenues by offsetting losses on certain projects with revenues based on estimated probable recoveries on claims that had not been resolved with customers.

Under the new practice , Halliburton recognized revenues on certain claims that the company believed were probable of collection rather than, pursuant to the prior practice,claims that had been finally resolved with its customers. Although both of Halliburton's claims recongnitions practices, the historical one and the revised one, are appropriate under generally accepted accounting principles, there was a significant difference in their respective effects on Halliburton's financial presentation; the new practice reduced losses on several large construction projects. As a result Halliburton's reported income was higher under the revised practice than it would have been under the prior practice.

Over six reporting periods, spanning approximately 18 months covering 1998 and 1999 Halliburton failed to disclosde its change of accounting pracitce. In the absence of any discloisure, the investing public was deprived of a full opportunity to assess Halliburton's reported income more particularly, the precise nature of that income, and its comparability ot Hallibuyrton's income in prior periods. It was not until March 2000 that Halliburton in its 1999 form 10-K disclosed its change in accounting practice.

Such failure in not disclosing of change in accounting practice and not implementing proper audit procedure Halliburton's merged in

Scandal of 1998-1999.