Elucidate the technique company is using that may constitute

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Reference no: EM13128878

Explain the technique the company is using that may constitute a financial shenanigan. Indicate both the technique used and how the auditor should react.

Highlinetime Inc., was about to report lower earnings than expected for 2010. The shortfall would be about $10,000,000. Before year end, the company contracts with Bogus Insurance, Inc., which insures corporate earnings. Under the contract, Highlinetime will receive an insurance payment of $10,000,000 at year end 2010, in exchange for a premium due at the end of 2011 in the amount of $10,000,000. The insurance payment in 2010 will enable Highlinetime, Inc. to meet its earnings expectations.

Reference no: EM13128878

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