He has let members of his soccer club believe that he is a qualified accountant and financial adviser. One month before the collapse of One-Up, an internet company, Enrico advised club members to buy every One-Up share they could. Neither he nor the members knew that most financial advisers had warned that One-Up was badly managed for some time. Several club members have lost a large sum of money because they followed Enrico’s advice. 1.
Let’s understand the elements of a valid contract, and discuss how consumers and banks each have a duty of good faith and fair dealing in the banking relationship. Let’s also compare and contrast the differences between intentional and negligent tort actions. I’ll discuss the tort action of “Interference with Contractual Relations and Participating in a Breach of Fiduciary duty” and, if the bank I’ve chosen were to behave as JP Morgan did, would I be able to prevail in such a tort action. Lastly let’s discuss how banks have protected the software that allows for online transaction to occur through automation. Discuss how administrative agencies like the Securities and Exchange Commission (SEC) or the Commodities Futures Trading Commission (CFTC) take action in order to be effective in preventing high-risk gambles in securities / banking, a foundation of the economy.
Floating point numbers can introduce rounding errors in the banking industry, which may lead to financial benefit for the bank but not for the customer. Analyze the ethics of knowingly benefitting from rounding errors. Propose a plan on how the rounding error should be handled. 7. Differentiate between the exponential format and the floating point format in terms of: * Format * Processing speed *
They are not required to have knowledge and expertise to start and maintain a successful business. A business model is usually evaluated by a bank or other financial institution that the company acquires capital from. An auditor is required to uphold integrity and has a responsibility to the stockholders to maintain competence and independence. All of this must be achieved while examining sufficient, pertinent evidence to obtain reasonable assurance as to the material fairness of the client's financial statements. This evidence supports what has happened thus far in the client's business.
The negative confirmation asks the customer to respond only if they disagree with the balance determined by the client. The positive confirmation asks the debtors to confirm directly to the auditors whether the balance of the accounts receivable from the debtors is correct or not. The positive confirmation would be used to get confirmations from third parties to verify Smackey’s accounts receivables. We will also examine the sales invoices and compare them to shipping documents to make sure that what has been invoice is what it was
A side benefit to that is there is no loan payment to budget for. A second advantage to equity financing is the company does not have to offer up collateral as they would have in the original plan to finance the $50 million. Therefore, the company is not at risk of losing collateral, or possibly the entire business to the financier. Additionally, any possible losses incurred will be shared with the equity holders. The final advantage enjoyed by AMSC is that they can keep the financial flexibility described in Aswath Damodaran’s presentation: The Debt-Equity Trade Off: The Capital Structure Decision.
There seem to be little segregation of duties and independent verification. Two controls alone could have prevented the fraud. Pavlo had the ability to modify the accounts receivable balances and also receive customer payments. A supervisory-level employee not involved in recording transactions in the accounts receivable system should have reviewed and authorized adjustments to customer accounts. Because he was not forced to get approval from someone else for what he was doing the fraud went uncovered.
All transactions have two sides that need to be recorded correctly. Vu did not take the time to determine the location of the error that is causing the imbalance and rectify the unidentified issue. The error also may not be just in one area it could be a combination of multiple errors which could have a material effect on the financial statements. Although this could appear immaterial depending on the size of the company overall the intent is not to try to cover up an error but “plugging in” values to make the financial statements complete. This is committing fraud and consequences will occur regardless the value of the error.
4. What remains to be seen however, is whether shareholders are better or worse off with more leverage. Problem 2 does not tell us, because there we computed total value of equity, and shareholders care about value per share. Ordinarily, total value will be a good proxy for what is happening to the price per share, but in the case of a relevering firm, that may not be true. Implicitly we assumed that, as our firm in problems 1-3 levered up, it was repurchasing stock on the open market (you will note that EBIT did not change, so management was clearly not investing the proceeds from the loans in cash-generating assets).