Accounting Fraud at Xerox Corporation

Abstract

The accounting and ethical issues at Xerox in the late 1990s were many and highly interesting. It appears that Management at Xerox Corporation faced with strategic mistakes and a tough economic environment including Japanese competition resorted to creative accounting practices to meet financial targets and Wall Street expectations. This case presents a brief history of Xerox Corporation going back to 1906 when Xerox was founded in New York. This is followed by a discussion of Xerox's corporate culture in the 1980s and 90s and the SEC investigation of its accounting practices in the 1990s. The focus of the case is the actions of an assistant treasurer, James Bingham, one of several finance managers that top management used to guide Xerox through tough economic times and help make financial results go their way. Mr. Bingham, at least initially, viewed helping management meet financial targets as a challenge. However, in due course he realized that all he is doing is help mask bigger and bigger problems that would lead Xerox in only one direction-bankruptcy. A short teaching note is also included. The teaching note includes several suggested questions along with a brief discussion. The focus in the teaching note is on the actions of James Bingham and ethical issues. The case also presents an opportunity to present or reintroduce the Institute of Management Accountant's Statement of Ethical Professional Practice to students. The IMA's Statement of Ethical Professional Practice provides guidance for accountants to act in a responsible and ethical manner in conducting their day to day activities. The case requires the students to apply the IMA's Statement of Ethical Professional Practice to the actions of James Bingham and other accounting personnel at Xerox Corporation.