Reference no: EM132730646

John Sleaze and Mary Scum run Earnings Management, Inc., a consulting business. They have the following items in their product line:

1. A database that lists types of depreciable assets and the minimum and maximum depreciation lives that have been accepted by auditors for each type of asset. The listing can be sorted by audit firm, so a client can know the minimums and maximums accepted by each individual audit firm.

2. A detailed analysis of the accounting rules on revenue recognition. The analysis reveals loopholes in the rules that companies can use to strategically time the recognition of revenue.

3. A comprehensive list of all accounting issues for which there is no generally accepted standard. This list can be viewed as an identification of all of the fuzzy areas of accounting that a company might exploit if it desired to conduct earnings management.

4. A list of the local offices for each major audit firm that appear to have been the most "flexible" in signing off on aggressive accounting treatments by clients. In some cases, the list includes specific audit partners who have a reputation for being accommodating when a client firm wishes to use aggressive earnings management techniques.

Problem 1: You are an FBI agent investigating Earnings Management, Inc., for possible indictment on securities fraud and racketeering charges. Comment on whether you think John and Mary have committed any indictable offenses.