On June $30,1999,$ during a conference call with analysts, Microsoft Corporation announced

that the company was under investigation by the Securities and Exchange Commission $($SEC$)$ for

certain accounting practices. Although the exact focus of the investigation was not disclosed, the

common belief was that the investigation involved the company's deferral of revenue and other

undisclosed reserve accounts. ${?}^2$

Company Background ${?}^3$

As the developer and manufacturer of products such as the Windows operating system, the

Internet Explorer web browser, and the Microsoft Office suite of applications, Microsoft was easily

the most widely recognized software developer in the world. The company's history had been well

documented$-$in articles, books, documentaries and even a made$-$for$-$television movie, "Pirates of

Silicon Valley." Bill Gates and Paul Allen founded the company in $1975,$ with the idea that one day

there would be "a computer on every desk and in every home." The company's big break came in

$1980$ when it negotiated with IBM to provide the operating system for IBM's new personal computer.

The result was MS$-$DOS and by the mid$-80$s$,$ Microsoft dominated the market for operating systems.

The company went public on March $13,1986$ at $$25\mathrm{.}75$ per share. As of June $30,1999,$ one share of

Microsoft purchased at the initial public offering was worth almost $$13,000.$ By this time, the

company also had the highest market value of any U$.$S$.$ public company $($approximately $$460$ billion$)$

and its CEO, Bill Gates, was the world's wealthiest individual.

Since going public in $1986,$ the company's financial performance had been nothing short of

extraordinary $($see Exhibits $1$ and $2).$ Revenue and operating income grew an average of $43\%$ and