Screen Microtech Inc.

Screen Microtech Inc., a capacitive touch screen manufacturer, had seen significant growth over the past year: it had moved its manufacturing plant, expanded operations, built a larger client base and seen an unprecedented increase in sales. Its chief executive officer was preparing an initial public offering that could lead to a significant bonus and stock shares for himself and for the company’s chief financial officer. This could be enough to induce them to secure improved financial results through any means necessary. Certainly, it could bias their approach to accounting policy choices. Was the company’s accounting ethical? Did it feature earnings management or earnings manipulation? What was the difference between the two, if any? What was the effect of such accounting practices on the financial markets?