Case Study Stewart Enterprises

Stewart Enterprises Inc. was a funeral and cemetery service company. A man named Albert Stewart in 1910 in New Orleans established this company. Albert Stewart was an owner of a real estate business called Acme Realty Company. Through his real estate business Albert purchased three cemeteries called St. Vincent de Paul and a St. Vincent de Paul shop that built cemetery monuments for graves. As time went by Albert Stewart and his sons joined the real estate company and the cemetery company together and began expanding with the purchases of more cemetery properties. Over time the company began having business throughout 30 states and the bulk of their business was from states such as California, Florida, and Texas. The reason for that was these …show more content…
The funeral service was based off of at time deaths or pre-need services. The expense that was being used was pre-need cemetery merchandise. The pre-need service was roughly 10% of the Stewart Enterprises revenue. They were recognizing the cemetery merchandise as being sold. Stewart Enterprise was unable to provide actual contract amounts and only provided estimate amounts. The estimated amounts were estimated from 2001 to 2005 and revenue was overstated by more than 70 million. The overstated taxes during these years were net earnings before taxes. The individuals directly involved with this violation were the CEO and Vice President Budde and …show more content…
If the revenue was misstated in the first quarter that revenue number was only bound to increase as each quarter passed by. The accounting department was using the vendor invoice for pre need cemetery merchandise and multiplying that number by a mark up price. The mark up prices helped get to the estimated number. As time went by there were of course many errors in the AP method and many adjustments and corrections were made and eventually Stewart decided to implement his delivery system for revenue recognition because there were errors in the revenue as well. Part of this project he would go back to the presale contracts, review, and give more details, but it would have to be a review of roughly 700,000 contracts. In 2005 Stewart filed form 8-K notifying shareholders that there would be a restatement that would impact roughly 60 million or less. In 2006, Stewart realized that revenue was overstated due to the AP method and the mark up factors that Stewart. His mark up numbers was way off and he was using incorrect vendor costs. In 2006, Stewart filed form 10-k that said the revenue project was completed.