Androids Under Attacks Essay Sample
- Pages: 5
- Word count: 1,229
- Rewriting Possibility: 99% (excellent)
- Category: audit
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I. Android & Co Android & Co started in 1913 when Arthur and Clarence, both from the audit firm of Price bought out a small audit firm in Illinois to form Arthur, Clarence & Co, which became Androids & Co in 1918. Android headed the firm of Androids & Co until his death in 1945.Besides, Android who is founder of Androids & Co was a zealous supporter of high standards in
high standards in the accounting industry. In 1945, Leonardo Sparky, who succeeded Android at the founder’s death, continued this emphasis on honesty. For many years, the Android’s motto was “Think Straight, Talk Straight”.
Enroona is a client of Android for past 16 years.
iii. Solid Waste
Solid Waste also one of the organization that involved in this case, where Solid Waste is Also one of the Android’s clients in 1971 before Solid Waste becomes a public company. For Android, Solid Waste is a “crown jewel” client. Until 1997, every Chief Financial Officer (CFO) and Chief Accounting Officer (CAO) in Solid Waste had previously worked as an auditor in Android’s firm.
a) Many off- book partnerships not properly accounted for and were not independent entities. b) David is one of Android’s partners that conducts Enronaa Corporation, there are evidence suggesting that Android assisted to “puff up” reported returns of off Balance Sheet activities which is the financial are not fairly representing. c) Android has used accounting practices that allow Enroona to hide their debts, but it’s all are within the context of the fair value accounting.
ii) Solid Waste
a) Its failure to accrue tax and self-insurance expenses. b) Improper use of purchase accounting to increase its environmental remediation reserve. c) Improper charges of operating expenses to the environmental remediation reserve (ERR) d) Refusal to write-off permitting and project costs on impaired or abandoned landfills.
a) Solid Waste uses netting and lack of disclosure, even though Android disagrees with it. b) Offsets current period expenses and prior period misstatements against a portion of the gain realized from the sale of two dis continued operation, amounting up to USD $85.1 million. c) Inflated income by making change to salvage value.
d) Improperly accounting for insurance recoveries.
e) Incorrectly applying purchase acquisition accounting principles to its environmental remediation reserve (ERR). SOLUTION
David should also issue an adverse opinion report to Enronaa, and admit the previous misstatements and false issuance of reports to SEC since the financial reports consist of a lot of fraud and mistake for the past 16 years. First situation, while David choose to shred the document mean he doesn’t admit the guilt as an auditor for Enronaa, therefore SEC will immediately start investigations towards Androids. Thus, it is impossible for Androids to destroy all the evidence of wrongdoing, since document is not the only evidence, when comes into inspection to the auditors, the truth will be review and finally SEC will discovered all the fraud that had been done by Androids and Enronaa. At the end, the penalty and loss will be horrible than to admit the guilty. Because the company might not have the chance to retain their reputation and other customer, at last, Androids might go into bankruptcy. The other situation will be David choose not to shred the documents, in the same time, mean David admit the guilty between them and Enronaa. However, the consequences that arise from it will be not only the penalty but also SEC will start to investigate towards other clients of Androids, since people believe that while one client have the problem, other clients as well might have the same problems too.
However, since they admit the fraud that had been done, they will immediately take action to retain their reputation and improve their performance to maintain their market. For example, they might find out and terminate the responsibility engagement team. And they might also need to restructure their organization in all perspective as well. Also, by admitting Androids’ mistakes, they are actually splitting the trouble with clients as well. So even though Androids have to pay the penalties; theirs clients also need to do the same. On the other hand, if the SEC found out themselves, the penalties will be much more severe. Based on the situation above, our group advice David not to shred the document and admit the guilty. In the same time, the audit report for the year should be issues as adverse opinion report. Another reason we advise David to admit the mistake is to show that he still maintain his professional ethics. Conflict of Interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other. Conflict of Interest is a set of circumstances that creates a risk that professional judgment or actions regarding primary interest will influenced by a secondary interest.
In conflict of interest, independence is one of the important tips to ensure an auditor able to act with both independence of mind and appearance. Independence of mind and independence of appearance is related with this issue. In independence of mind, Android afraid to lose Enronaa because Enroona is one of the important clients in an Android firm and Android hides the Enroona debt in maintains the relationship with their client. In independence of appearance, it is shown the relationship of Casey and David, where they are friend and go vacation together. This close relationship will affect their firm. In addition, the reason for this solution is also related with the integrity.
The principle of integrity imposes an obligation on all professional accountants to be straightforward and honest in all professional and business relationships. Integrity also implies fair dealing and truthfulness. In integrity, a professional accountant shall not knowingly be associated with reports, returns, communications or other information where the professional accountant believes that the information contains a materially false or misleading statement, contains statements or information furnished recklessly or omits or obscures information required to be included where such omission or obscurity would be misleading. Thus, when a professional accountant becomes aware that the accountant has been associated with such information, the accountant shall take steps to be disassociated from that information.
As a conclusion, the main issues in this case is to determine whether David and his engagement team should shred or not shredding the document and also admit or not to their guilty. However, our decision is to advice David to admit their guilty and not shredding the documents. Documents are just one of the evidence that can be found by SEC, there are a lot of other sources that enable SEC to get the evidence of guilty. Therefore, as an auditor, David at least has to comply with his own professional ethics and paid his responsibility toward the stakeholders. Finally, we also give some recommendation such as create an independent, self-regulatory organization (SRO), focus on independent, and companies build up a robust ethics infrastructure to ensure the same problem will not exist anymore.
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