Professor Elam

Wednesday August 9, 2017

Globalscape's internal audit committee announced an over statement of earnings by 6%.

But the stock dropped 18%. It has been falling the last couple of weeks.

This demonstrates that failure to follow the rules can have a larger impact than the act itself. The error was on the order of $219,000 resulting in a net income of

$3.7 million rather than the $3.9 million reported. So a relatively small error results in a massive loss of market capitalization. This is why we are studying revenue recognition in ACCT 3303.