Even though the leaders contended that conflicts between its auditing and consulting missions had no impact on the quality of its work but actually they do. The two roles rarely mix well--a fact Arthur Andersen himself warned about as far back as the Great Depression. The culture changed where the auditor was no longer the guy people respected in the '80s and '90s. Even as many of its partners and staff continued to uphold a high standard, others compromised in the interest of generating fees. Andersen's remaining leadership disputed that the firm emphasized the selling of services over audit quality, replacing partners who were strong auditors but didn't generate enough revenue.
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.
Their bankruptcies became inevitable as the Securities and Exchange Commission (SEC) and financial analysts began to see the signs of irregularities among numerous companies. When the SEC ordered the restatement of their financial reports in accordance with the GAAP rules, it turned out that these companies were mostly founded by inflated revenues and negative financial conditions. Short after, companies reputations and financial credibility began break like bubbles, in the wake of the ensuing investigations. The result of these action caused investors once again lost their trust and confidence in America’s publicly traded companies, which eventually led to more bankruptcies. As a result, multitudes became jobless, and the trend went from bad to worse throughout the decade.
1. From your understanding of the Sarbanes-Oxley Act, explain how you feel it may negatively affect America’s stock exchanges. The higher than expected costs for many public companies caused some companies to abandon their public status. The costs of SOX compliance negatively affect companies, markets, investors, and economic growth. Fewer companies are willing to enter the market because of the SOX requirements that make going public too costly.
The airline is working to adopt a new and innovative marketing concept that will assist in increasing its profitability. Customers are looking to the airlines competitors for travel needs. Classic Airlines will have to consider both its internal and external threats and weaknesses that could possible prevent it from increasing profitability. Current Issues Classic Airlines has had issues with sales and reduced profit due to a decrease in customers and a drop in reward program members. The company’s internal and external marketing programs have not been successful and customers have voiced their complaints.
Since the stock market burst and NextCard no longer had access to the debt and equity markets. The credit card customers proved to be extremely high risks and resulted in large credit losses for the business. Once the large class-action lawsuit was launched and SEC began investigating, Robert Trauger of E&Y the audit engagement partner for NextCard called Oliver Flanagan his top subordinate on the 2000 NextCard audit to request revision to the prior year audit workpapers. Robert and Olive altered the report, however, Mullen retained a diskette with original workpapers and Flanagan obtained the diskette. Olive informed Trauger that it was destroyed but instead it was given to federal authorities.
This culture change caused demoralized staff and created ‘culture of fear’. Furthermore, many top executives left the company and many employees were replaced. External Problems: * The fallen stock price Home Depot’s common stock had fallen 30% since Nardelli had taken charge of the company. * Increasing competition Home Depot main competitor, Lowe’s, had been moving into areas previously dominated by Home Depot. * Decreasing customer satisfaction The high quality customer service was Home Depot’s competitive advantage and differentiated it from its competitors.
RUNNING HEAD: AMERICAN AIRLINES American Airlines and US Airway’s Merger By Aveon Sims Strayer University BUS 508 Contemporary Business Professor Jean Fonkoua August 24, 2014 Abstract American Airlines has suffered tremendous profit losses over the last few years. The losses have been so great that the company filed Chapter 11 bankruptcy. The news for the Chapter 11 bankruptcy protection was a shock to many, considering the fact that they had enough money to operate and cover their losses through the following year. The merger indeed was a great decision on behalf of American Airlines. The merger itself was questionable.
It is clear that some nations in the EU, namely Greece, Portugal and Spain have been living beyond their means for years, running deficits that are far too high, as well as neglecting their duties to not involve other nations in their debt issues. The big danger in fiscal consolidation is that it creates a downward, where falling demand and employment trigger declining tax revenues and budget deficits actually get worse instead of better. Further spending cuts or tax increases only worsen the downward spiral. A reduction in government spending and increase in taxes are withdrawals from the circular flow of income. This reduction in AD causes mass unemployment which could bring about deflation and interest rates will need to rise to control this.