...Karen- Kimberly-Clark Case Study In 1872 four business men, John Kimberly, Havilah Babcock, Charles Clark and Frank Shattuck created a company called Kimberly, Clark and Company which initially sold manufactured paper goods. They would eventually branch out into personal care items in order to compete in a larger market with companies like Proctor and Gamble. In 1978, Kimberly-Clark introduced Huggies disposable diapers and were an instant success. In the mid 1990’s Kimberly-Clark merged with Scott Paper and found them in an unusual predicament, the merger did not go well, the integration of Scott and Kimberly-Clark was a rocky one that would lead to dissatisfaction on the part of most Scott employees and especially Scott’s senior management.[1] In 2002, Proctor and Gamble released a line of high end Pampers disposable diapers that not only was a substitute for Huggies, but also captured a large portion of Huggies market share. Around 2003, Kimberly-Clark decided to restructure the way that the company focused on business products. They chose to use a system of “grow, sustain and fix”, which split all products in to areas that needed growth, needed to sustain market share or items that needed to be reformulated. This system was a total failure and caused the company to take several steps back in market share in most of their areas.[2] Had Kimberly-Clark gone for a more product related divisional structure, it is possible that they would not have lost so much of its...
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...May 15, 1996 Mr. John Ruhl Vice President - Finance Padgett Paper Products Company Richmond, Virginia Dear John: Thank you for the opportunity last week to review the financial plans you have for Padgett. This letter sets forth our thoughts relating to the need for properly incorporating your bank loan into these plans. Currently, Padgett has $6,853,000 outstanding in short term 90-day notes, and we understand that an additional $1.0 to $1.5 million is likely to be borrowed to support new receivables of your new acquisition. This is in contrast with the circumstance of May 1994 when we financed your previous acquisition, and our loan outstanding increased from $500,000 to $1,850,000. At that time, an anticipated restructuring of the loan was postponed until a clearer definition of longer term corporate cash need could be ascertained. In late 1995, we expressed an interest in discussing with you a restructuring of the then loan outstanding so that legitimately long-term funds could be sourced on a proper long-term basis. Our subsequent conversations and cash flow study were complicated by the anticipated major acquisition and its impact. Enclosed is a copy of our most recent Padgett forecast, the results of which we have jointly reviewed. On balance, our feeling is that the forecast may tend to understate the cash requirement in that it assumes moderate sales growth, the upholding of traditional margins, and tight control over capital expenditures and dividends. The forecast does seem...
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...Knapp Case 1.9- ZZZZ Best Company, Inc. 1. A review consists of an auditor performing analytical procedures and inquiries to provide a reasonable basis for obtaining limited assurance. In a review, the auditor does not give an opinion on the financial statements. He/she merely looks over the statements for any material misstatements or modifications that need to be made. Contrarily, in terms of the level of assurance, during an audit an auditor obtains a high level of assurance, expresses an opinion on accuracy and level of assurance, and tests for misstatements and the client’s internal controls. 2. The occurrence assertion is very important, especially in this case, to ensure that the financial statements of a company faithfully represent actual transactions, assets, and liabilities of the company. There were certain limitations of the evidence gathered by the procedures performed in the ZZZZ Best case with regard to the assertion of occurrence: a. Confirmations- The information obtained through George Greenspan’s confirmation seems invaluable to me based on the fact that the confirmation was only sent to Tom Padgett, especially since Tom Padgett was paid by Minkow to confirm contracts. Even though there was no way for Mr. Greenspan to know that Mr. Padgett was being paid off, I believe that he should have found more valuable information through his confirmations by sending them out to more than one person involved in the company. b. Analytical Procedures-...
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...ZZZZ Best ------------------------------------------------- Date: October 10, 2013 ZZZZ Best Company, Inc., a carpet cleaning and restoration company became the illegitimate business front for one of the largest investment frauds in American history. Barry Minkow started working in the cutthroat carpet cleaning industry at a young age. A risky Minkow began perpetrating frauds on a small scale and eventually took his Ponzi scheme public. Red flags went unnoticed from banks, investors, and auditors. Crucial auditor mistakes postponed the uncovering of Minkow’s scam. ZZZZ Best, Inc. significantly impacted both the accounting and auditing industry both in practice and standards. Barry Minkow founded ZZZZ Best Company at the age of sixteen. Minkow’s exposure to the carpet cleaning industry came from his mother. She answered phones and conducted clerical work for a carpet cleaning company in the San Fernando Valley of California (Knapp). The carpet cleaning industry required very little start-up capital, even less experience, and no licensing requirements. These attributes enticed Minkow, a young entrepreneur, to start his own company.. However, the competition in the carpet cleaning industry made it difficult for Minkow to make profitable sales. Vendors wanted money from Minkow and sales were not enough to cover his costs. Banks refused to loan him money because his company barely made a profit (Knapp). These financial struggles Minkow incurred led him to perform illegal...
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...Fraud of ZZZ Best Company The ZZZ Best was the carpet cleaning company that was started by 15 year old Barry Minkow in 1982. He was inspired to enter into this industry by his mother when he was 12 years old. His mother was working as a telephone solicitor for a small carpet cleaning firm. Though most of the companies in carpet cleaning industry were legitimate, the nature of this business attracts many seedy characters of the malpractice. There are no barriers for any entry even no license was required. It was too easy that a 16 year old boy can start this business with his new driver’s license. The boy started his business as “rug sucker”. Minkow started his business named ZZZZ Best Carpet Cleaning Company in Reseda, San Fernando Valley, California. In the beginning stage Minkow ran his home based business out of his parent’s garage. Minkow soon realized that a small carpet cleaning business grew rapidly in next five years, but Minkow realized that it was difficult to earn from this business. To make earning better he had to face the cutthroat competition. The young boy had to face customer complaints, bad checks, and nagging vendors also demanding payment. And within very short time phrase he faced the fact of shortage of working capital. And moreover because of Minkow’s young age and the fact that ZZZZ Best was only marginally profitable business. All the local banks refused to give him loan. So, this teenager was looking for some easy ways of earning. Like check kiting...
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...ZZZZ Best company Inc. Summary “ZZZZ Best company” was founded by 16-year old Barry Minkow. The core activity of company was carpet cleaning. As he began doing business, Minkow soon realized that carpet cleaning was a difficult way to earn money because customers always complained and vendors demanded payments. Soon Minkow started seeking for financing but realized that bank were not willing to lend him money due to his age and low profitability of his business. That’s why he came up with the idea of forgeries and thefts from his insurance company. Later on, making friends he asked the insurance claim adjuster - Tom Padgett to confirm from time to time that Minkow’s company received occasional insurance restoration contracts on remodeling works on properties damaged by fire, storms and other catastrophes. Soon he realized that there was no need in development of carpet business because the main “income” was obtained by restoration operations. Then, Minkow decided to go public and for that purpose he hired independent auditor – George Greenspan. By that time Minkow had established fake insurance company and Padgett had got the top position in it to confirm fraudulent restoration contracts, so Greenspan didn’t notice any problems with those sites. By the end of the year he was dismissed and Minkow retained “Ernst & Whinney” to enhance creditability of his operations on restoration contracts. “Ernst & Whinney” agreed to provide 4 types of services to “ZZZZ best company”:...
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...Transcript of ZZZZ Best Company, Inc ZZZZ Best Company, Inc Case 1.9 Audit Review VS Full Audit Review • The accountant is not aware of any misstatements or material modifications that need to be made • Limited assurance • Auditor has no opinion on the financial statements, just looks them over Barry Minkow- 16 years old 1982 Carpet cleaning business turned insurance restoration Tom Padgett and Interstate Appraisal Services Ernst & Whinney- elaborate scheme to convince them History 1. Client imposed audit limitations 2. Limitations of audit evidence 3. Importance of auditor communication when one resigns & 8K filing Key Issues Audit- • Auditor obtains a high level of assurance • Auditor can express an opinion about the accuracy and level of assurance • Auditor tests internal controls and tests for misstatements and obtains and understanding of the entities internal control and fraud risk Matt Sepiol Samantha Claysen Limitations of Audit Evidence AU 326- Audit Evidence Auditors Used Confirmation, Documentation, and Analytical Procedures AU 326.08- Information from outside sources is better than from internal sources Confirmations were made by Tom Padgett who was involved in the scheme. Interstate Appraisal Services and Assured Property Management provided the Documentation Was Involved in Fraud Collusion amongst outside Parties Gives Evidence Limitations The client receiving payment doesn't prove the existence of those contracts. No third...
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...T.1.SAS No. 106 “Audit Evidence’, identifies the principal “managementassertions” that underlie a set of financial statements. The occurrenceassertion was particularly critical for ZZZZ Best’s insurance restorationcontracts. ZZZZ Best’s auditors obtained third-party confirmations tosupport the contracts, reviewed available documentation, performedanalytical procedures to evaluate the reasonableness of the revenuesrecorded on the contracts, and visited selected restoration sites.Comment on the limitations of the evidence that these proceduresprovide with regard to the management assertion of occurrence. Upon the performance of those procedures, the auditors of ZZZZBest Inc. had obtained evidence in order to draw reasonableconclusions on which to base the audit opinion. However, theseevidences are subject to limitations due to factors not controlled by theauditors. First limitation of the evidence is its insufficiency to supportthe occurrence, reliability and relevance of events and transactions.Mere paperwork is not enough to prove an event to have existed. Italso needs inquiries from people accountable in recording orrecognizing such events. Moreover, there’s a risk in being dependenton evidences provided by the management itself. Auditors should askcooperation from the third parties in order to verify all records. Secondlimitation is the rules implemented by the client which prohibit auditorsto further inspect or review the financial standing of the company.Some clients...
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...CASE 1.9 ZZZZ Best Company, \nc. On May 19,1987, a short article in The Wall Street Journal reported that ZZZZ Best Company, Inc., of Reseda, California, had signed a contract for a $13.8 million insurance restoration project. This project was just the most recent of a series of large restoration jobs obtained by ZZZZ Best (pronounced "zee best"). Located in the San Fernando Valley of southern California, ZZZZ Best had begun operations in the fall of 1982 as a small, door-ta-door carpet cleaning operation. Under the direction of Barry Minkow, the extroverted 16-year-old who founded the company and initially operated it out of his parents' garage, ZZZZ Best experienced explosive growth in both revenues and profits during the first several years of its existence. In the three-year period from 1984 to 1987, the company's net income surged from less than $200,000 to more than $5 million on revenues of $50 million. When 72ZZ Best went public in 1986,Minkow and several of his close associates became multimillionaires overnight. By the late spring of 1987,the market value of Minkow's stock in the company exceeded $100 million, while the total market value of 72ZZ Best surpassed $200 million. The youngest chief executive officer in the nation enjoyed the "good life;which included an elegant home in an exclusive suburb of Los Angeles and a fire-engine red Ferrari. Minkow's charm and entrepreneurial genius made him a sought-after commodity on the television talk show circuit and caused...
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...luxury to some areas of industry it is an economic necessity. Also, considering the advent of social media vehicles such as; Facebook, Instagram, and Twitter, technology enables anyone to have the potential to access to platforms for sharing their opinions. When one has access to a platform opinions and comments are created that can be both powerful and scathing for the good or bad. In extreme instances, becoming more commonplace, options and comments expressed can turn into threating harassment. In turn, many are experiencing a continuous pattern of “digital harassment” called cyberbullying. Cyberbullying is determined to be a new cause of fear in our society, especially in younger generations and adolescents. The narrative of this paper will discuss cyberbullying, its negative influence through the use of modern technology, and the ethical/social implications of that negative influence. How the technology of the Internet and social media use by adolescents causes mental health issues through cyberbullying, a negative and evasive ethical and social implication of technological use. Cyberbullying The term cyberbullying has been used more frequently in the past ten years, but what is actually considered cyberbullying? According to...
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...CASE 1.9 ZZZZ Best Company, \nc. On May 19,1987, a short article in The Wall Street Journal reported that ZZZZ Best Company, Inc., of Reseda, California, had signed a contract for a $13.8 million insurance restoration project. This project was just the most recent of a series of large restoration jobs obtained by ZZZZ Best (pronounced "zee best"). Located in the San Fernando Valley of southern California, ZZZZ Best had begun operations in the fall of 1982 as a small, door-ta-door carpet cleaning operation. Under the direction of Barry Minkow, the extroverted 16-year-old who founded the company and initially operated it out of his parents' garage, ZZZZ Best experienced explosive growth in both revenues and profits during the first several years of its existence. In the three-year period from 1984 to 1987, the company's net income surged from less than $200,000 to more than $5 million on revenues of $50 million. When 72ZZ Best went public in 1986,Minkow and several of his close associates became multimillionaires overnight. By the late spring of 1987,the market value of Minkow's stock in the company exceeded $100 million, while the total market value of 72ZZ Best surpassed $200 million. The youngest chief executive officer in the nation enjoyed the "good life;which included an elegant home in an exclusive suburb of Los Angeles and a fire-engine red Ferrari. Minkow's charm and entrepreneurial genius made him a sought-after commodity on the television talk show circuit and caused...
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...ZZZZ Best Company, Inc. Shiqi Hu, Lin Ding, Trang Mai, Yi Wang ACCT3309 Audit, O’Hara 11/03/2014 Background Barry Minkow, who is a young entrepreneur with history of credit card fraud as a teenager, was convicted on 57 counts of securities fraud. He started ZZZZ Best Company in carpet cleaning business in 1982 when he was only 16 years old. ZZZZ Best Company was turned into insurance restoration business that Minkow recognized the benefits with his own “innovative” way to finance his business. Minkow used fake restoration contracts to generate the paper profits and fake information to convince bankers to loan him money with help from his friend, Tom Padgett. The company focused on insurance restoration business and went public in 1986. First full-scope audit was completed by George Greenspan in April 1986. Ernst & Whinney was hired in 1987 after George was dismissed by Minkow. Larry Gary, auditor from Ernst & Whinney, required to visit a restoration site in a multimillion-dollar contract but was discouraged by Minkow. Minkow also required auditors to sign a confidentiality agreement that not to make any follow-up phone calls to any contractors and owners of the buildings before the visit to these phony sites. In May 1987, the Los Angeles Times published article on ZZZZ Best Company fraud accusations. Audit firms resigned after confirmations of the fraud and Ernst & Whinney received an anonymous letter that contains several allegations of fraudulent information...
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...Padgett Paper Products Case Study Solution Case Solution Outline -Summary -Problem Statement -Company -Market -Product -Projections -Options -Current Capital Structure -Proposed Capital Structure -Review Summary Objective: To find a mutually acceptable debt structure that will minimize lender risk while increasing company value. Constraints: 1) realistic cash flow projections, 2) Bank safety levels Situation for each Business Group Bank: Over extended and is in a bad situation. Lending exceeds reasonable levels and is not collateralized or subject to covenants. An $8 million loan is abnormal for the bank. The company’s management does not appear to understand the unrealistic debt situation, the impact on firm value and impact on the upcoming audit report. Management: Has unrealistic expectations and a lack of understanding of impact of current structure of firm value. Company: The Company has considerable levels of equity and is not maximizing its financial structure. It is capable of taking on considerably more debt, however, the debt needs to be more appropriately structured. Ownership: Closely-held company with owner having little interest in management. Owned for dividend distribution. Problem Statement: Because of inflation and an acquisition, Padgett's financial needs have risen to a permanent level rather than being merely seasonal in nature. Management at the company's bank must revise Padgett's debt structure in a mutually satisfactory...
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...project charter is a very important deliverable at initialization of the project, it can be defined basically as a document which officially starts or authorizes a project. It acts as a reference for the future. Any charter should roughly define the business case, scope, objectives, stakeholders and risk and responsibilities. With project management practices getting more organized and more defined, the importance of the project is now well known but, there seem to be some disputes over the structure of a project charter, when it should be created and who should be creating the project charter. This paper aims at finding these answers with the help of information available. Various proposals given by different experts are considered and each proposal is analyzed to determine what would a perfect project charter look like and when it should be created and by whom. This research paper is concerned with defining an ideal structure for a project charter. FINDINGS What is a project charter? The Project Charter is a document used for authorizing a project or a project phase. The project charter is usually formed in the initial phase of a project. A project charter can prove to be very powerful if it is used properly. A Project charter lists down all...
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...CASES IN FINANCIAL MANAGEMENT SYLLABUS FIN 522 Professor James A. Gentry Cases In Financial Management 343M Wohlers Hall Spring Semester 2009 333-7995 2043 BIF j-gentry@uiuc.edu Office Hours: 10:30 a.m. to 11:45 a.m. on Mon. and Wed/. or by Appointment I. Teaching Objectives Financial decision making cases are used to… • Create a highly interactive learning environment; • Learn about the application of financial management and credit analysis concepts; • Discover what you do not know about the practice of financial management; • Show what you have learned; • Highlight the relationships between strategic goals and the creation of firm value; • Develop techniques for interpreting a firm’s financial data and strategic plans; • Enhance your critical thinking and problem solving skills; • Expand your understanding of financial theory and its application; • Improve your listening and cooperative learning skills. II. Learning Promises At the end of this course your will be able to… • Think like a financial manager; • Interpret a company’s financial health by evaluating the performance...
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