1. Was the spokesperson correct when stating there was no difference in total revenues and total net income using Xerox’s original accounting methods versus the revised methods? Do you agree that this was a timing issue that had nothing to do with how successful Xerox was at operating its business? Should revenue timing matter to an investor?
2. Evaluate the alleged accounting errors. Were they material? Were they fraudulent?
Chester Carlson was born on February 8, 1908, the only child of an itinerant barber. As a youth, Chester was fascinated with graphics arts and chemistry. His father was crippled with arthritis, and his mother died when he was 17. By the age of 14, he was the family’s main source of income, as he worked odd jobs after school and on weekends. As a teenager, Chester worked for a printer, and even printed two issues of a small magazine for amateur chemists using a discarded printing machine he received partially in exchange for his work.1
After graduating from high school, Mr. Carlson worked his way through a local junior college, where he received a degree in chemistry. Two years later, in 1930, he received a degree in physics from the California Institute of Technology. In the worsening depression, Mr. Carlson applied for 82 positions and received only two replies, one of which was from Bell Laboratories in New York City, which offered him a job. He was laid off from Bell Labs but then was hired by an electronics firm in New York. He studied law at night and earned a degree from New York Law School, an independent law school in lower Manhattan. While working as the manager of the electronics firm’s patent department, Mr. Carlson observed that there were never enough copies of patents and no quick way of getting more. 2 At the time, corporations prepared document copies by using carbon paper in a typewriter or else typing on a mimeograph master and running low-quality copies on a mimeograph machine.