This created confusion of reporting responsibilities, political tension, and reluctance to take responsibility and action. To address the main problem Erik Peterson is inexperienced and this shows in his incapacity to handle various situations in the case. He lacks the support of the upper management (Jenkins and Hardy), and does not reach out for help among his peers( Green,Cantor) He also has to face insubordination,Curt Andrew being the prime accused in this case. He also faces the Turn on Deadline 1) Lack of communication from frontline workers to Curt Andrews (and thus Erik) in providing tower building status, updates, or needs. Erik seems hampered at quickly knowing exactly where the 21 towers stand.
(INTRO) One of key accounting activities this WorldCom case points out is how WorldCom capitalized leased lines which brought little or no value to the organization, but were accounted as capitalized assets, and the impact this can have on external users. “To maintain and broaden public confidence, members should perform all responsibilities with highest sense of integrity.” (AICPA.com) By capitalizing the costs of these leased lines instead of it would have shown a significantly lower net value of the company. It would have negatively affected cash flows and all the ratios. This activity certainly discredits the profession. It does not offer the fullest disclosure, objectivity, and transparency.
Some of the security weaknesses noted in the case study includes the fact that Sony was using an older version of software (Apache Web Server) which had known security issues. This impaired the security of their firewall, allowing hackers to get in. As for control weaknesses, there were obviously not the appropriate policies or organizational procedures in place, since Sony did not know what information was stolen from their servers, the fact that it took days for Sony to inform their customers of the breach immediately shows a lack of training of their management and staff and also Sony’s delay in shutting down all of their servers at the point when they learned of the attack. If the proper policies and organizational procedures were in place, perhaps it would not have been as dramatic for Sony. 2.
These problems, as stated in the case study, include: lack of purchasing, design, and testing processes, inspections that are after the fact with out in-process controls or feed back loops. It also leads to a lack of product tractability, quality maintenance records of the equipment so improvement or stabilization data is not available. Designs are made on hunches - there is no decisions based on facts and data. Statements like “even if it is a little off spec was tolerable, we need market share now” shows a poor quality attitude and the schedule is more important. The inspector had used only a sample of testing to find the eight rejected cases but had no way of tracking where they had gone shows a lack of in-process controls and a lack of product tractability.
The loophole employed by Enron has since been plugged by the Sarbanes-Oxley Act, however, the external auditors’ failure to exercise professional judgment in relation to such dealings reflects poorly on the effectiveness of their audit practices. The external auditors’ inability to recognize the nature of these special entities and the transactions being entered into by Enron prevented the auditors from recognizing them as part of the larger Enron economic entity. As a result, revenues were significantly overstated while liabilities were
Nevertheless, could be really unsocial and unsustainable when it has to work in stable situation, because mainly his peers and subordinates they will not accept or tolerate that style for long periods of time. According to Amok his style could be title as Directive and Pacetting, which means that entails command and control behavior that at times became coercive. It also involves leading by example and personal heroics. The advantages of these styles are that it fuels innovation, productivity and growth but on the other side ultimately could erode organizational performance, demolishing trust and undermine morale. This type of style can be observd in Alex when he mention that he had been hired to shake up the product team and launch the product quickly.
Related Party Identification of related parties -Difficulties • Related parties and associated transactions are often difficult to identify, as it can be hard to establish exactly who, or what, are the related parties of an entity. FRS 124 Related Party • Disclosures contains definitions which in theory serve to provide a framework for identifying related parties, but deciding whether a definition is met can be complex and subjective. For example, related party status can be obtained via significant interest, but in reality it can be difficult to establish the extent of influence that potential related parties can actually exert over a company. • The directors may be reluctant to disclose to the auditors the existence of related parties or transactions. This is an area of the financial statements where knowledge is largely confined to management, and the auditors often have little choice but to rely on full disclosure by management in order to identify related parties.
Explain the limitations of PESTLE and SWOT PESTLE is a form of management method that examines the effect that events or influences from outside the business may have on their performance; political, economic, social, technological, legal and environmental. One disadvantage to using this method is that people using this method tend to oversimplify the information that they use in order to make decisions. This may lead to an incorrect decision being made as the information has not been fully digested or analysed, unless this information have been brutally examined in find their impact then the findings may become almost useless. Another limitation is that the external factors considered during a PESTLE analysis are dynamic and can change at a fast pace, these changes can occur in less than 24 hours, therefore this makes it difficult to predict how these factors why affect the business. Also, environmental impacts that may have a negative impact on the business may not be noticeable until the later stages.
The reputation of the company is also at risk when the going concern is in doubt. Substantial doubt regarding a company’s ability to continue as a going concern is prevalent to the financial statements. The auditor can be reprimanded for excluding an explanatory paragraph. The principles of ethical conduct of auditors would be compromised if the auditor is not compliant with reporting standards. The integrity and concern for the public interest would be violated.
Case 1.1 - Enron Corporation Q1. In my opinion, the parties to be most at fault for the “crisis of confidence” are 1) Top Executives of Enron Corporation: Top Executives like Kenneth Lay, Jeffrey Skilling, Andrew Fastow, Richard A Causey etc. jointly made-up Enron’s publicly reported financial results and making misleading statements about the Company’s business and financial position in order to make Enron the world’s greatest company. 2) Arthur Andersen (Enron’s Public Accounting Firm): Besides being Independent Auditing Firm Anderson also provided consulting services to Enron. As a result, they allowed Enron to use those fraudulent statements for 15 years.