...s e c TIo n client acceptance C a s es inC lu de d in t his se Ction 1 3 1.1 Ocean Manufacturing, Inc. . . . . . . . . . . . . . . . . . . . . . . The New Client Acceptance Decision InsTrucTor resource Manual — Do noT copy or reDIsTrIbuTe InsTrucTor resource Manual — Do noT copy or reDIsTrIbuTe ocean Manufacturing, Inc. The new client acceptance Decision ins tr uC t ional o b je C t ive s [1] To c a s e 1.1 Mark S. Beasley · Frank A. Buckless · Steven M. Glover · Douglas F. Prawitt help students understand the process of considering a new prospective audit client and the factors that auditors commonly consider in making the acceptance decision. [2] To give students experience in computing and interpreting preliminary analytical procedures commonly used in obtaining an understanding of a prospective client during the client acceptance decision process. [3] To raise issues relating to auditor independence in the context of client acceptance, both in terms of financial interests and the provision of non-audit services. To illustrate the subjective and sometimes difficult nature of the judgments involved in the client acceptance decision, and to give students the opportunity to justify a recommendation on client acceptance in the presence of both significant positive and negative factors. [5] To help students understand how information gathered in the client acceptance process can help the auditor in planning the audit if the client...
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...Case 1.1 Enron Corporation Saint Leo University 1. a. Andersen auditors – the auditors from Andersen failed to properly perform their professional auditing duties. b. Enron Board of Directors and top executives – the Enron executives focused on creating the foremost corporation, and with that goal performed many actions that would lead to the demise of Enron. Specifically, Kenneth Lay, Jeffrey Skilling, and Andrew Fastow are the masterminds behind the scheme. c. Accounting regulators – at the time of Enron, there was not as much regulation as there is post-Enron, so while there was no one specifically at fault for catching Enron in their actions, there should have been more regulation put in place as there is today to prevent this fraud. 2. a. Executive professionals search/human resource services – a company’s auditing firm cannot also provide employee search services for them. The potential executives have a large amount of power in the company, therefore relating the two can serve as a powerhouse for internal fraud. b. Software design services – if the company’s auditor is the designer of the software being audited, there would be a large amount of bias on the auditor’s part to put the software in a positive light. This would make it difficult for the company to see where real improvements need to be made. c. Investment adviser – essentially the auditor’s job description is to evaluate the firm’s financial escapades. If an auditor suggests a certain investment...
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...Case 1.1: Vancity Vancity, a Vancouver-based co-operative which is now Canada’s largest credit union was founded in 1946 and began with only $22 in total assets. Vancity is an excellent example of a company that is committed to creating a healthy and committed workforce. As stated in the article the co-operative creates an optimum working environment by allowing “Employees (to) enjoy business casual dress, listen to music while they work, participate on Vancity sports teams, and attend a host of social events… If an employee has a young child, it may be necessary to build a workday that allows for flexibility. This positive approach recognizes the challenges of balancing work and life commitments and empowers employees to create the right environment to thrive at both.” Vancity has a vision to achieve positive change and has succeeded though a number of programs. The article lists a few of their achievements such as; Giving back a portion of their profits to members and communities Offering bank services to the less fortunate Training their employees financial literary skills Being a strong supporter of women in the workplace After receiving disappointing results from its first employee survey Vancity held focus groups of 120 employees. The co-operative later vowed to increase investment training and development, renew the organizations infrastructure and provide employees with growth opportunity by focusing on new areas in hopes to re-engage their employees...
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...Ebora, Lauren Fatima C. Performance Management Case Study 1.1 & 1.2 1. In my present employer, two (2) characteristics that are present are Strategic Congruence and Thoroughness. It is stated that congruence is achieved by coming together. It means that individual and company goals must have the same goals and objectives. In strategic congruence, corporate, business and functional strategies of a firm must mutually consistent with each of its employees or subordinates. We used this kind of strategy in order for us to achieve the same goals and objectives per period. The company sets our quota periodically. At the end of the period, we discuss with our superior of what percentage we have achieved in a certain time. Aside from strategic congruence, Thoroughness is also present. We also follow the 4 dimensions in performance management. Employees are being evaluated at a certain period of time, once a year, including managers. Human resource will also evaluate our job descriptions as well as our responsibilities and duties. After being evaluated for a certain period of time, feedbacks are given to us regarding our performance for that period of time. 2. Two characteristics that are not present in our firm are the Identification of Effective and Ineffective performance and Reliability. There are some employees that are not working properly yet they are still receiving allowances and incentives. It is a combined effort of all employees disregard of what an employee...
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...Case 1.1 Diseases of the Skin and Eyes You are out to coffee with your friend Diane, when she confides that she and her husband Ted are thinking of starting a family. She goes on to say that she has just come back from a checkup with her OB/GYN. “The doctor said I am healthy and everything,” she says, “but she wants to see my immunization records, to make sure I have been vaccinated for rubella before I get pregnant.” You nod. Diane wants to know why this vaccination would be important for her. 1. What is rubella? Rubella (German measles) is an infection caused by the rubella virus. Although it most commonly occurs in young children, it can affect anyone. The illness is usually mild. However, rubella in a pregnant woman can cause serious damage to the unborn child. 2. Why would Diane’s doctor be concerned about Diane’s immunity to rubella? If a pregnant women has rubella, the virus is likely to cause serious damage to the unborn child or cause a miscarriage. Rubella can lead to damage to the heart, brain, hearing and sight. The baby is likely to be born with a very serious condition called the congenital rubella syndrome. Diane thanks you for your clear explanation. “I probably won’t be able to find my immunization records: you know I wasn’t raised in the U.S.” But Diane is not worried. “I think I had rubella as a child. I remember being very sick with a rash, high fever, and white spots in my throat. I even had to be in the hospital for a few...
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...Case 1.1- Enron Corporation 1) The Enron debacle created what one public official reported was a “crisis of confidence” on the part of the public in the accounting profession. List the parties who you believe were most responsible for that crisis. Briefly justify each of your choices. * Both the Securities and Exchange Commission and the Financial Accounting Standards Board had a hand in lack of the public’s confidence in the accounting profession. Due to the lack of regulation for SPEs at the time of Enron scandal, companies found it easy to exploit the “3 percent” loophole, which allowed them to avoid having to consolidate the SPEs balance sheets with their everyday operations. This, in turn, allowed companies to move liabilities off balance sheet without having to make too many disclosures. The lack of directive by the SEC and FASB made it acceptable for companies to report inflated gains on various misleading transactions. * Next, the audit firms that deviated from their fiduciary duty to their clients and the public contributed greatly to the crisis in the accounting profession. There is an inherent conflict of interest when a firm begins providing audit services and a wide range of consulting services; the firm loses its objectivity when it helps a client to pursue aggressive, irresponsible accounting tactics. In the Enron case, Andersen was complicit in the aggressive accounting schemes and nefarious financial reporting for its SPE transactions...
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...Synopsis Enron was believed to be the company to take over the world in the 1990’s. The company was growing at exponential rates that were unheard of at the time. It was ranked among the 7 top corporations in the world peaking at a net worth of $70 billion. The company’s overwhelming wealth and success gave birth to some overconfident and ultimately greedy people within the company. In the end, Enron fell due to falsification of financial records, reporting profits well in excess of the actual. “On Dec. 2, 2001, Enron declared bankruptcy. Thousands of people were thrown out of work, and thousands of investors -- including most of the company's employees -- lost billions of dollars as Enron's shares shrank to penny-stock levels (http://www.npr.org/news/specials/enron/).” Enron is considered to be the largest corporate fallout in US history. The overconfidence of executive leaders, falsification and manipulation of financial statements, and Andersen’s hidings of the true audit findings, eventually led to the demise of this innovative corporation. Questions 1. The Enron debacle created what one public official reported was a “crisis of confidence” on the part of the public in the accounting profession. List the parties who you believe are the most responsible for that crisis. Briefly justify each of your choices. Executive management of Enron- When misstatements and irregularities emerged and were made clear to the public, the executives of Enron lost the confidence of the...
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...1. Starbucks, like any other company thinking going international has to research the place where they want to globalize. Some controlled elements in global markets are the price, the product, and the promotion. Starbucks plans to eventually come to Italy. An obstacle in the Italian market is the price. Italian coffee is cheaper than the U.S. We pay for an expresso at $1.50, the price in north Italy for an expresso is 67 cents and in south of Italy, just 55 cents. For product, Italian coffee bars do well by serving food as well as coffee, that’s an area where Starbucks struggles (1). In the promotion, Starbucks spends $30 million annually on ads for new launching, but that’s only 1% of revenue. An element that is uncontrolled are competitive forces – Japan is Starbucks’ top foreign market, but sales growth has fallen, as rivals offer similar fares and in England imitations are coming in to grab the marker share. The cultural force is another element. The youth in Vienna is more enthusiastic in embracing new things so that target market could be a younger crowd (1). 2. A major risk Starbucks faces is saturation of U.S markets. Analyst contend that after 2 years Starbucks will have to depend on overseas growth to maintain annual revenue growth of 20%. It also faces problems of changing generations. The 20-30 something are turned off by power and image of a well known brand that sells a cup of coffee for $3. A solution for the saturation in the U.S is to offer new products that...
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...Danielle A. Smalls ACC 747 Advanced Topics in Auditing July 21, 2015 Case 1.1 Waste Management Case 1.1 Waste Management: The Expense Recognition Principle 1. The expense recognition principle also known as the “matching” principle is when expenses should be recognized in the same period as the revenues to which they relate. This principle is important to users of financial statements because if this principle is not followed stakeholders of a company can be deluded to thinking a company is earning profits when it really is not. Which would lead investors into investing in a company they normally would not. 2. Waste management violated the expense recognition principle by making numerous unsupported changes to the estimated useful lives and/or salvage values of one or more categories of vehicles, containers and equipment. Such changes reduced the amount of depreciation expense recorded in a particular period. An entry that may have been use by Waste Management for fraud would be a debit to the accumulated depreciation and a credit to the depreciation expense. 3. Paragraph 2 of PCAOB Auditing Standard No. 5 states “effective internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. 3/ If one or more material weaknesses exist, the company's internal control over financial reporting cannot be considered effective. 4/”...
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...Case 1.1 1a. Whether or not dumping should be permitted is a moral question. 1b. "Are dangerous products of any use in the third world?" is a nonmoral question. 1c. "Is it proper for the U.S. government to sponsor the export of dangerous products overseas?" is a moral question. 1d. Whether or not the notification system works as its supporters claim it works is a nonmoral question. 1e. "Is it legal to dump this product overseas?" is a nonmoral question. 2. Dumping is a method of getting rid of unwanted products or substances that are harmful to people, animals, or the environment by exporting them to other countries in order to make a profit or mitigate a loss. An example used in the text is the flame resistant pajamas that were recalled because they contained Tris. These pajamas were dumped in overseas markets to help negate the company’s loss. 3. Dumpers dump because they want to either make a profit or avoid a loss in profit. I am sure some of the companies employees may have second thoughts on dumping, but not “making your number” can be quite a motivator to sidestep your moral beliefs. If I were one of the manufacturers of the Tris pajamas, I would have a hard time sending a product that I know to be toxic to a market with less restrictive regulations, but I think ultimately, I would do it if all information was disclosed not only to the government, but to the end purchaser as well. 4. Just because no laws may be broken does not mean it is always...
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...Amanda Fevurly 19 January 2016 FINA 375 Jiri Tresl Integrative Case 1.1- Starbucks While coffee is a simple product, the “Starbucks Experience” that is mentioned several times throughout the case is exactly what creates value for their customers and makes their company successful. Their strategy includes creating a home away from home included as a part of their day-to-day routine that reflects the personalities of their consumers and community. Consumers are willing to pay more for Starbucks because they have a greater perceived value through experience. Regarding Porter’s Five Forces, Starbucks confronts a variety of challenges that has presented difficulties specifically from 2007 to 2010. Starting with the competitive rivalry and competition, Starbucks faces many direct and indirect competitors. Facing competitors such as fast food companies like McDonalds, Donut shops like Krispy Kreme or Dunkin’ Donuts, fast-casual restaurant like Panera, and the thousands of local coffee shops pose as rivals to Starbucks. As one of its most important concerns, Starbucks faces fierce competition in the global market place. Next, the threat of new entrants in the coffee market exists at a high level but does not necessarily propose a significant effect on Starbucks because of economies of scale. While there are not necessarily entry barriers, Starbucks has created a brand that would be very costly and difficult to develop from scratch giving them a strong sustainable competitive advantage...
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...1. Five procedures an auditor should perform in determining whether to accept a client. a. The firm’s independence in fact and in appearance. (required) b. Qualifications of the firm to undertake the engagement. c. Management of the reporting entity is honest and not involved in illegal acts. (required) d. The client’s financial reporting system, and internal control system, will provide fairly presented financial statements. e. Communicate with the previous auditor after receiving permission from the client. This can be found in AU315. (required) 2. Ratios Return on Equity 2011 2010 2009 8.94 7.11 6.28 Return on Assets 2011 2010 2009 4.54 3.77 3.39 Assets to Equity 2011 2010 2009 1.97 1.88 1.85 Accounts Receivable Turnover 2011 2010 2009 11.69 13.11 14.02 Average Collection Period 2011 2010 2009 31.23 27.85 26.03 Inventory Turnover 2011 2010 2009 6.08 4.51 3.47 Days in Inventory 2011 2010 2009 59.9 80.88 104.98 Debt Ratio 2011 2010 2009 .49 .47 .46 Debt to Equity Ratio 2011 2010 2009 .97 .88 .85 Times interest earned 2011 2010 2009 4.7 4.24 6.23 Current ratio 2011 2010 2009 1.85 1.91 1.69 Profit margin 2011 2010 2009 5.5 6.0 4.7 Differences to be aware of: 1. Low return on equity in comparison. 2. Low return on assets in comparison. 3. Accounts receivable is high in comparison. 4. Inventory turnover is low in comparison...
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...Case 1.1: Ocean Manufacturing, Inc. 1. Identify five procedures an auditor should perform in determining whether to accept a client. Which of these five are required by auditing standards? (check slides) - Obtain and review available financial information - Inquire of third parties about integrity of prospective client and its management - Consider circumstances that require special attention, unusual business or audit risks - Consider the technical competency of potential audit staff and supervision * AS No. 10: Supervision of the Audit Engagement * AU 210 Training and Proficiency of the Independent Auditor - Consider if acceptance would violate regulatory or the Code of Professional Conduct 2. Using Ocean’s financial information, calculate relevant preliminary analytical procedures to obtain a better understanding of the prospective client and to determine how Ocean is doing financially. Compare Ocean’s ratios to the industry rations provided. Identify any major differences and briefly list any concerns that arise from this analysis. Industry Industry 2011 Standards 2010 Standards ROE 8.94% 20.33% 7.11% 26.22% ROA 4.54% 6.62% 3.78% 8.10% Assets to Equity 1.97 3.30 1.88 2.82 A/R Turnover 11.69 7.49 13.11 6...
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...Drexlers Bar B Que. 05/08/2014 pdf text original [pic] 1.1: Drexler’s World Famous Bar-B-Que. Questions. 1. What role do values play in how the Drexler’s restaurant interfaces with its neighbors and customers? Values play an extremely important role in how the Drexler’s restaurant interfaces with its neighbors and customers. Consumers tend to look at the total value and in the case of Drexler’s the customers receive excellent care. Mrs. Scott constantly is checking with customers to make sure they are receiving superb service. Customers want organizations to be responsive to their needs, give the best price and product and be prompt with services. Drexler’s also gives back to the community, which is avery important piece to being an effective organization. You must give back to your environment 2. Is Drexler’s an effective organization? Why?Drexler’s is an effective organization. They value their customers, provide superior service and a great product. Drexler’s also adapts to the outside environment.They expanded their restaurant in order to accommodate the growing client base. The organization also gives back to the community by sponsoring a softball team anda Boy Scout troop. 3. Apply the systems model to illustrate how Drexler’s Bar-B-Que operates with its environment. Beginning with the inputs the organization will input their values and supplies which they then process in order to generate a successful output -- their wonderful food.Their product is...
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...company manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. Case: The Globalization of eBay International Business the Globalization of eBay Case study I. Case Background eBay Inc. is an American multinational internet consumer-to-consumer corporation, headquartered in San Jose, California. It was founded in 1995, and became a notable success story of the dot-com bubble; it is now a multi-billion dollar business with operations localized in over thirty countries. The company manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. (Wikipedia) Operations eBay created an efficient distribution system that demanded virtually little supervision. Sellers paid eBay for the opportunity to design, set up, monitor, and supervise their particular auctions while buyers used eBay's software to search for products and place bids. After the auction clock ran out, the seller contacted the winning bidder to negotiate payment and shipping terms. For this matchmaking service, eBay charges between 7 and 18 percent of the closing auction price. In 1999, net revenues topped $225 million. By 2006, revenues grew to $6 billion with net income of $1.1 billion. The company projects revenue near $7.5 billion in 2007. Core vision To support interaction in the eBay community by providing a useful online...
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