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In re Kurzweil Applied Intelligence, Inc.
Citation:
Accounting & Auditing Enforcement Release No. 689 [1995–1998 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 74,204 (July 25, 1995)Facts
Kurzweil Applied Intelligence, Inc. was a company that developed and marketed speech recognition products. In preparation for its initial public offering in 1993, Kurzweil’s executives engaged in a scheme to artificially inflate the company’s revenue figures to meet projections that had been provided to underwriters and potential investors. The fraudulent practices included creating false sales documents, backdating sales contracts to record revenue in earlier periods, shipping products to customers who had not ordered them, and recognizing revenue on contingent sales where customers had the right to return products. These practices violated Generally Accepted Accounting Principles regarding revenue recognition and resulted in materially false and misleading financial statements being included in Kurzweil’s IPO registration statement and subsequent SEC filings.
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