Boeing Case The Boeing case posed several examples of questionable decisions being made. The first instance of questionable behavior included a blatant example of conflict of interest with Darleen Druyun and Mike Sears. The next instance was when Boeing executive, Larry Satchell, was caught stealing trade secrets of a competitor and violating U.S. procurement laws. Another example of questionable ethics from the case was Boeing’s lack of transparency when they manipulated financial statements to ensure a merger would go through. Next, Boeing’s knowledge of pay discrimination was revealed.
As future accountants our job is not to turn a blind eye to actions like this but Cooper gives us the courage to stand up two large companies. WorldCom reported $3.8 billion accounting fraud on its own; this is a direct correlation to Cooper's investigation. The company had to file for bankruptcy protection wiping out if shareholders. Without her taking a stand and doing the necessary investigating WorldCom investors stockholders and employees would have been worst off. This is why she was named Time magazines “Persons of the Year” in
The company still went public even though the management was aware of their losses. They needed new business strategy that will be a source of revenue for the company. After the internet bubble “burst” it became obvious that NextCard was deceiving investors and other stakeholders. The Feds were able to uncover the fraudulent accounting practices used by the audit team of NextCard. Given PCAOB oversight of accounting firms and the AICPA Code of Conduct, discuss whether or not you believe that public accounting firms can successfully manipulate audit work papers and records of clients engaged in fraudulent activity.
The prime motivation behind the decisions of Arthur Andersen’s audit partners was money and lining their own pockets. The desire for money drove partners to ignore the possible outcome of their actions. If they had recognized the precarious position they were in, AA leadership might have corrected the flaw in the AA internal control that allowed the Enron audit failures to happen. AA was the only one of the Big 5 to allow the partner in charge of the audit to override a ruling of the quality control partner. (Brooks, 2007, p. 109) I find this to be an interesting statement from the text and want to ask, “How would someone trained to look for serious situations such as the Enron audit failures not know the position they were in unless completely ignoring the situation for financial benefit?” “The final disintegration of AA was not caused directly by the Enron audit deficiencies, but by a related decision to shred Enron audit documents, and the conviction on the charge of obstruction of justice that resulted.” (Brooks, 2007, p. 111) If the partners did not
Ethicality of Accounting Activities The WorldCom case is an example of unethical behavior performed by a company by abusing accounting activities to reflect misleading financial information. In this case the main cause of this unethical behavior is greed and neglect by the executives that allowed and encouraged this behavior. On the other hand, WorldCom employee Cynthia Cooper is a prime example of ethical behavior that took place to uncover the wrong doing of individuals. Upon reading an article of a former financial analyst, Cynthia Copper’s mind was intrigued, an audit was conducted on capital spending. In the WorldCom and Cynthia Cooper case unethical behavior was evident in multiple departments and involved top key players that tried to cover up the fraud.
Lessons learned: Auditing firms can be held responsible for the misrepresentation of financial information if they don’t practice due care. Auditing firms should asses risky accounts and suspicious transactions to ensure the reliability of the financial statement. Questions 1. Identify legitimate business practices that corporate executives can use for the primary purpose of manipulating or “managing” their company’s reported operating results. Are such practices ethical?
Among other provisions in the PSLRA is a proportionate liability rule. Under this liability standard, a defendant that is guilty of no more than “recklessness” is generally responsible for only a percentage of a plaintiff’s losses, the percentage of those losses produced by the defendant’s reckless behavior. HMI’s former stockholders filed a class-action lawsuit against BDO Seidman, HMI’s former audit firm. The plaintiff attorneys attempted to prove that the BDO Seidman auditors had been reckless during the 1995 HMI audit, which prevented them from discovering the large inventory fraud carried out by Clifford Hotte, HMI’s CEO, and Drew Bergman, the company’s CFO. The plaintiff attorneys repeatedly pointed to a series of red flags that the BDO Seidman auditors had allegedly overlooked or discounted during the 1995 audit.
For an audit firm given management function advice o their audit clients it could threaten the auditor’s independence by having to evaluate the work of someone that they recommended. With the audit firms giving the financial information design and implementation service they would be forced to evaluate the accounting system that they helped set for the audit client. This goes with the Bookkeeping and Accounting record services because the audit firm would lose their independence by having to evaluate these statements that they helped prepare, so therefore, they would be an internal auditor instead of an external auditor like they should be. 3. I believe
At the same time, PeopleSoft’s had an interest in acquiring J. D. Edwards, which seemed to upset Oracle. Overall, the deal seemed scandalous, but how did PeopleSoft ensure they were not going down without a fight, before the final deal was done and Oracle’s acquisition of the PeopleSoft for $10.3 billion Why did the executives of PeopleSoft reject the unsolicited takeover from Oracle Corporation? The reading suggests that the takeover was a ploy, to prevent the company’s acquisition of J. D. Edwards and damage PeopleSoft’s business, in doing so. The deal depended on the ability of PeopleSoft maintaining its stock price through trade of stock to acquire J. D. Edwards. Oracle’s mission was to deter new customers from purchasing PeopleSoft applications because of the uncertainty over the future of the company (Boatright 2009).
The article revealed that KKD booked the purchase cost as an intangible asset and failed to properly account for amortization expenses. Typically, the accounting treatment for reacquired franchise rights is to amortize the value of the acquisition over its legal life. The aggressive accounting practices of the company triggered the U.S. Securities and Exchange Commission (SEC) to investigate KDD in January of 2005. KKD’s Board of Directors decided to restate the financial statement to correct previous errors. However, the failure to provide the new financial statement on time damaged the reputation of the company even further.