...Ernst & Young EXECUTIVE SUMMARY Ernst & Young commonly referred as EY, is one of the Big Four professional services firms along with Deloitte, PricewaterhouseCoopers and KPMG Ernst & Young is a multinational professional services firm headquartered in London, United Kingdom and was the third largest professional services firm in the world by aggregated revenue in 2012. The firm has employed 167,000 people and has more than 700 offices across more than 140 countries, providing assurance (including financial audit), tax, consulting and advisory services. In FY 2012, EY earned a record of $24.4 billion USD in revenue, ranking the third among the Big Four, after PricewaterhouseCoopers and Deloitte, ahead of KPMG. Ernst & Young offers its services to companies in a vast range of industries, including asset management, life sciences, mining, media and entertainment, retail, technology, and hotel and leisure. The company's financial reporting segment offers an IFRS/GAAP comparison so companies can compare and contrast the international and US accounting standards. The group's members firms are organized in four geographic areas: Europe, the Middle East, India, and Africa; the Americas (including Ernst & Young LLP); Japan; and the Asia/Pacific region. Ernst & Young is increasingly focused on the emerging markets, which have seen more rapid economic recovery than the developed nations. The company sees the trend of growth in the emerging markets as one that...
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...Contrary to some belief, accounting is not a “walk-in-the-park” career. Accountants do not sit at a desk one-hundred percent of the time crunching numbers that always add up perfectly. In fact, accounting fraud is one of the largest scandals found today. When an accountant enters an engagement with a client, who are they liable to? Certainly not just to the client, but also anyone who could negatively be affected by a material misstatement, as well as the government. These responsibilities are not easily assumed, nor are they equally distributed. Accountants assume a large responsibility to their clients. They enter a contractual agreement through an engagement letter, and use engagement letters to minimize the risk they assume under the contract. Many engagement letters include memos limiting the recovery. (Reinstein, Lobingier, & Green, 2009) Accountants expressly agree to do a project by a specific date, and imply that the work will be completed carefully. If an accountant breaches the contract, they can be found liable for damages. If it can be found that an accountant did not act with skill and competence, causing harm to their client, negligence can be proved. Accountants also may be found guilty of fraud. Fraud can be proved if an accountant makes a false statement, knowing it is false, and the client relies on the information, resulting in damages. Another liability to the client is the trust clients give their accountants. They are liable to keep the...
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...Micro Enhancement International, Inc. v. Coopers & Lybrand LLP 40 P. 3d 1206 (Wash. App. 2002) Facts of the Case: Micro Enhancement International (MEI) was a software development company that was on the about to have an IPO. They hired Coopers and Lybrand as the auditor. The IPO for MEI was delayed because Coopers and Lybrand were resisting some of MEI’s recognized revenue and were threating to add a “going concern” to the audit. In the end Coopers and Lybrand allowed MEI to recognize the revenue and took away the “going concern” qualification. By the time the issue was settled MEI had lost the underwriter for the IPO and then went bankrupt shortly after. MEI sued Coopers and Lybrand for multiple things, but then wanted to add a breach of fiduciary duty. MEI’s CEO Staples said that, “he trusted Coopers and that Coopers had agreed to do the audit to do the Audit and to serve as MEI’s business advisor…” The judge denied this request and MEI appealed. Procedural History: The judge denied MEI’s request to add the breach of fiduciary duty so MEI appealed. Legal Issue: The issue in this case is the establishment of Cooper and Lybrand’s fiduciary duty to MEI. If this duty is established then MEI will get to add that breach, however, if not, the judge’s original ruling will be affirmed. Reasoning/Analysis: The first thing is to understand what causes a fiduciary duty. There are two types, Matter of Law (between a attorney and client, physicians and patients, partners...
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...account costs of goods sold. HP believes that Autonomy participated in what is known as round-trips, where companies sell each other products at high prices to each other recording a lot of profit without money ever exchanging hands. These practices inflated operating profit significantly All the while Autonomy founder Mike Lynch along with other former Autonomy executives deny all accusations of wrongdoing claiming that HP are using Autonomy has a scape goat for running the company into the ground. HP has reported the situation to both the American and British authorities and investigations are ongoing. HP is currently being sued by investors that claim that HP’s board were negligent in their due diligence of Autonomy. Since 2009, analysts have questioned the strength of Autonomy’s business and the legitimacy of their claims of rapid growth. Fears that HP was overpaying for Autonomy were widely held. According to Paul Morland, three red flags made him suspicious of Autonomy: poor cash conversion, an inflated organic growth...
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...Events that led to Cathy Walter to take actions In January 2004 when the NAB’s FX losses were revealed, Cathy Walter, a director of NAB, proposed that the global audit firm PricewaterhouseCoopers (PwC) be sued. The fees paid to PwC for advice in 2003 were twice as large as the fees paid to its statutory auditor (KPMG). Jim Power, a PwC partner, had acted as the NAB internal auditor during 2002. He had specifically advised Walter, who was chair of the Audit Committee, that the NAB was not exposed to the risk of FX losses as occurred in another overseas bank earlier that year. The external auditor, KPMG, had raised concerns about the NAB’s FX trading in 2001 and 2002. John Thorn resigned as a partner of PwC in September 2003 to become a director of the NAB and a member of the Audit Committee the following month. The board’s Risk Management Committee had been formed by the NAB in August 2003 with the charter of its Audit Committee changed accordingly. But the Risk Management Committee, chaired by Graham Kraehe, had only met once before a junior employee blew the whistle on the hidden FX losses in January 2004. The 7 non-executive directors ganged up against Walter to protect PwC and themselves in March 2004 by calling an extraordinary general meeting (EGM) of shareholders on May 21 to have Walter removed as a director. Evaluation of Cathy Walter’s Actions There are two opinions about Cathy Walter’s actions; A. She did not act in the best interests of the company 1. Breach of...
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...20549, Plaintiff, v. KPMG LLP, JOSEPH T. BOYLE, MICHAEL A. CONWAY, ANTHONY P. DOLANSKI, RONALD A. SAFRAN and THOMAS J. YOHO Defendant. | ) ) ) ) ) ) ) ) ) ) ) ) ) ) | Civil Action No. 03 CV 0671 (DLC) FIRST AMENDED COMPLAINT SECURITIES FRAUD Jury Trial Demanded | The Securities and Exchange Commission ("the Commission") alleges for its First Amended Complaint as follows:1. Defendants KPMG LLP ("KPMG") and certain KPMG partners permitted Xerox Corporation ("Xerox") to manipulate its accounting practices and fill a $3 billion "gap" between actual operating results and results reported to the investing public from 1997 through 2000. The fraudulent scheme allowed Xerox to claim it met performance expectations of Wall Street analysts, to mislead investors and, consequently, to boost the company's stock price. The KPMG defendants were not the watch dogs on behalf of shareholders and the public that the securities laws and the rules of the auditing profession required them to be. Instead of putting a stop to Xerox's fraudulent conduct, the KPMG defendants themselves engaged in fraud by falsely representing to the public that they had applied professional auditing standards to their review of Xerox's accounting, that Xerox's financial reporting was consistent with Generally Accepted Accounting Principles ("GAAP") and that Xerox's reported results fairly represented the financial condition of the company. There was no watchdog at Xerox. KPMG's...
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...decade of mismanagement and dubious experiment.s in ruthless cost-cutting and wholesale firings. For years to come, the name "Sunbeam" will bring to mind a company that relied on questionable accounting gimmicks and outright fraLid in sacrificing the company's reputation on the altar of enhanced earnings and a jacked-up stock price. It happened under the direction of disgraced CEO Albert Dunlap — the notorious, take-no-prisoners West Point graduate and veteran corporate downsizer unaffectionateiy known as "Chainsaw Al" — who put company managers under orders to get the stock price up at any cost. One way to do that, as it turned out, was to report robust .sales of electric blankets in the summer and barbecue grills in late autumn. Eventually, earnings woes and Dunlap's bluster prompted his ouster by an aroused board of directors in June 1998. That was followed shortly by the replacement of accounting firm Arthur Andersen and a series of investigations and shareholders lawsuits, most of which are still pending. Sunbeam joins an ignominious cluster of companies — Rite Aid, c u e International (now part of Cendant Corp.), Livent, Oxford Health Plans, Phar-Mor, Miniscribe and, most recently. MicroStrategies — in business's hall of shame. All of these companies have one depressing feature in common: top managers who, whether out of desperation or greed, apparently turned to accounting trickery to manufacture imaginary sales and other revenues and pump up earnings, sometimes over a period...
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...Google too grew in popularity “because it could provide simple, fast, and relevant search results” (Deresky, 2011). The differentiating factor was Google’s “PageRank technology which displays results…by looking for keywords inside web pages, but also gauging the importance of a search result based on the number and popularity of other sites that linked to the page” (Deresky, 2011). The use of Google has always been free to the user, the two revenue-generating avenues that have made Google one of the most profitable companies of the last decade is advertising and selling its technology. Google’s advertising branch is called AdWords and allows those wishing to advertise to “create ads and choose keywords, which are words or phrases related to the business. When people search on Google using keywords, ads appear next to or above search results” (Google.com). With the rapid success experienced in the U.S., Google quickly grew their business into the global arena by offering search results in hundreds of languages and being available on hundreds of different domains. This expansion helped to significantly increase Google’s revenues and made its IPO launch in 2004 possible. As Google began to dominate search engine market share in France, Germany, and Japan, it created concern and ultimately distrust of the U.S. domination that was taking place in their countries. This distrust led to lawsuits on the grounds of copyright infringement by multiple companies in France who were...
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...|3. GM |11.74 |11.74 |11.74 |11.74 |11.74 |11.74 | | | |12.65 |12.65 |12.65 | | | | | | | | | | | | | | |4. Unhealthy Accounting at HealthSouth |4.64 |4.64 |5.70 |5.70 |C.82 |G.84 | | | | | | | | | | | |5. KPMG: How Many Firms? |B.64 |B.64 |B.64 |1.56 | | | | | | | | | | | | | |6. Something Went Sour at Parmalat |6.58 |7.72...
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...Assignment 1 –FAC501 | Challenges facing the accounting profession and how I see them affecting me in the future with regards to IFRS companies submitting IFRS on US stock exchanges? Macdonald Felix Rusoto Muchemedzi Student Kaplan University As the Stock exchange affords different investors the opportunity to actively trade in the non-US companies and also provide an avenue for non-US companies to raise capital will the investment and accounting community be able to fully understand the information and make rational and informed decisions. In this discussion paper I will discuss the key requirement that participants should be financial bilingual to fully understand both sets of financial reports (IFRS and USGAAP) in order to be able to compare them, thus comparability is the main challenge facing the accounting profession and harmonization/convergence is a current and future requirement to ensure comparability, other factors will come into play as will be discussed later. My future has already started to be affected as I work in a US subsidiary in South Africa and we are required to provide USGAAP reconciliation from our IFRS financial reports and with greater convergence I strongly believe my work will be less as there will be no longer a need to be financially bilingual as there will be one set of financial reports. Literature review Both IFRS and USGAAP financial reporting standards are developed from the conceptual framework, hereafter IFRS conceptual framework...
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...Management Planning and Ethics Student __________ Axia College of University of Phoenix MGT 330 Management Theory, Practice and Application Instructor ________ Date _________ Management Planning and Ethics Only during the last few decades has planning become a widespread function of management. In the mid-1900s formal planning was only adopted by a few large corporations. Nowadays, aggressive and opportunistic entrepreneurs who run small firms also engage in formal planning (Bateman & Snell, 2009). Planning is directed to set up goals and to decide in advance what actions should be taken in order to achieve the established organizational goals. Planning includes activities directed to analyze the current situation, anticipate the future, as well to determine objectives and resources that will be used to achieve them. Planning is not considered as an informal response to a crisis. Planning is a purposeful effort geared towards providing “individuals and work units with a clear map to follow in their future activities; at the same time this map may be flexible enough to allow for individual circumstances and changing conditions” (Bateman & Snell, 2009, p. 132). The purpose of this paper is to evaluate Arthur Andersen’s, LLP, planning function of and how legal issues, ethics, and corporate social responsibilities impacted Arthur Andersen’s management planning. Arthur Andersen, LLP In 1913, Arthur Andersen and Clarence De Lany, accounting professors at Northwestern...
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...Synopsis A childhood friend summed up the driving force in Bernie Madoff’s life: “Bernie wanted to be rich.” As a youngster growing up in New York City, Bernie realized that Wall Street was the greatest wealth creation machine the world had ever known. So, after graduating from college in 1960, he set his sights on joining the exclusive fraternity that ran Wall Street by organizing his own one-man brokerage firm, Madoff Securities. Madoff was one of the first individuals to recognize that computer technology provided the means to “democratize” Wall Street by establishing a system that made securities trading much more efficient and much cheaper. In the early 1970s, Madoff and several other individuals organized the NASDAQ exchange, which was destined to become the world’s largest electronic stock market. Years later, the NYSE would be forced to follow suit and switch to electronic securities trading. Literally millions of investors have benefitted from the lower transaction costs of electronic securities trading that were in large part a result of the pioneering efforts of Bernie Madoff. Unfortunately, Bernie Madoff will not be remembered as a pioneer of electronic securities trading. Instead, the word “Madoff” will always be associated with the phrase “Ponzi scheme.” Although his stock brokerage firm was extremely lucrative, Madoff eventually established a parallel business, investment advisory services. Over a period of several decades, Madoff became known as the “Wizard of Wall Street”...
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...many Japanese companies. Some companies sought to offset the declining revenue with zaiteku, a form of speculative investment. While early activities generated profits in 1987, by 1991 Olympus recorded 2.1 billion losses in yen. Rumors circulated that by the late 1990s, losses had grown larger. Rather than come clean and admit the losses, management continued to ‘double down’ with riskier investments. Olympus created a tobashi scheme to shift losses off the Olympus balance sheet. Olympus created a tobashi scheme to shift losses off the Olympus balance sheet. Companies located in the Cayman Islands were purchased via exorbitant Management and Acquisition Fees. When the first Western President, Michael Woodford, questioned these practices, he was fired after two weeks on the job. Woodford became perhaps the first CEO ever to blow the whistle on his own firm. The subsequent scandal brought arrests of the executive team, an 80% decline in share price, the threat of de-listing on the Tokyo Exchange, and an international look at Japanese Corporate Governance. A detailed list of questions along with extensive teaching notes, bibliography, and references are provided. The case should be of interest in an accounting audit, ethics, governance, or international accounting class. Keywords: Corporate Governance; Whistleblower; Fraud; Tobashi; Zaiteku; Derivatives; Confucian...
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...An assessment of the implications for competition of a cap on auditors' liability July 2004 OFT741 1 1.1 EXECUTIVE SUMMARY This report contains the OFT's advice to Government on the implications for competition in the audit market of proposals to permit auditors to limit their liability by way of negotiated caps. The current liability position 1.2 At present auditors may not limit their liability for fault due to negligence or incompetence in audit work. Alongside regulation and reputation, liability acts as a discipline on audit quality in a context where shareholders and other third parties rely on information from an audit which is paid for by the company being audited. We are not aware of evidence suggesting that the courts in the UK have made, or are liable to make, excessive damages awards against auditors. Professional indemnity insurance is available, and LLP status – the chosen corporate form of many audit businesses – exists to protect partners' personal assets. The competition arguments 1.3 It has been argued that a cap on auditors' liability would however be procompetitive because it would lead to: • • • 1.4 a reduction in the barriers to entry and growth facing smaller audit firms the maintenance of competition between larger audit firms, including for non-audit work, and less risk of collapse of one of the Big Four. On the basis of the evidence available to us, however, none of these arguments appears compelling. First, the current liability...
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...The duties, status and liability of the auditor WHAT IS AN AUDIT?[1] The word “audit” comes from the Latin word audire which means “to hear” because, in the middle Ages, accounts or revenue and expenditure were “heard” by the auditor. An audit is the process of checking that the way an organisation presents information about its financial position (its ‘Financial Statement of Accounts’) is true and fair. In essence, ‘true and fair’ means that, in the auditor’s opinion, the company’s financial statements offer a true and fair view of its actual financial position, and that any assumptions they include are reasonable. We can say that, Auditing is works with evaluating organizations financial statements, systems, projects, process according to standards. It is also engaged with non-financial matters of an organization. Such audits can be performed to identify inefficiencies in an organization. Why Auditing:[2] Audits exist to add credibility to the implied assertion by an organization's management that its financial statements fairly represent the organization's position and performance to the firm's stakeholders. The principal stakeholders of a company are typically its shareholders, but other parties such as tax authorities, banks, regulators, suppliers, customers and employees may also have an interest in knowing that the financial statements are presented fairly, in all material aspects. An audit is not designed to provide assurance of 100% accuracy; rather it...
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