Whonka Case Essay

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Five Components of the COSO Framework The principles supporting the components of internal control are listed below: Control Environment • Integrity and Ethical Values Similar to the Tyco Fraud: half of the expenses for the extravagant Sardinian birthday party of CEO was paid by the company. • Commitment to Competence 1. Internal audit director, Arthur Slugworth only a high school graduate, so he is not competent to perform his duty. 2. The director of human resources, Violet Beauregarde has a music degree, so she is not competent to perform her duty because. 3. Errors in the financial statements are not detected by Management, Board, External and Internal Auditors:. o 2010: Total Assets ≠ Total Liabilities and Stockholders’ Equity. o 2010: Wrong Net Income figure on Consolidated Statements of Cash Flows. o No footnotes to the financial statements. 4. There are no CEO and CFO signed certificates included in the annual financial statement of Whonka that state that the financial statement do not contain any untrue statements etc. That they are responsible for the company’s internal controls. That they disclose to auditors/audit committee if control deficiencies and/or fraud exist (SOX section 302). 5. Annual financial statement doesn’t disclose whether or not the company has adopted a code of ethics for its CEO and senior financial officers. As is stated in SOX section 406. 6. There is no inclusion of management’s assessment of the effectiveness of the company’s internal control over financial reporting (SOX section 404). • Board of Directors and Audit Committee 1. Board. o Tommy Whonka should not be chair of the board and CEO at one time. o Board does not discuss the strategy proposed by Tommy Whonka. o The number of Board meetings is only two times per (should be at least 4 times). o Philip Schutz is not independent (he is the owner of

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