I need replies to the following discussion posts. Needs to have an in-text citation and should be approximately 2 paragraphs with an open-ended question to my fellow students. This does not need a title page, and one reference is sufficient. Please make sure there is an open-ended question at the end.
Supporting material: Attached
Question #1: To prepare for this week’s 3-part discussion, please go to the case that you read for this week, “Financial Reporting Problems at Molex, Inc.,” and review it again before you answer the following:
Consider the situation at Molex, Inc.; why were the auditors so concerned by management’s failure to disclose what appeared to be a small amount in the management representation letter?
What determines whether a financial reporting issue is ‘material’?
What should the board do?
Please reply to: Georgina
Deloitte & Touche were up upset because they believed Molex management knowingly deceived the auditors regarding a miscalculation of $8 million pre-tax of inventory. Audit firms were already under such scrutiny in terms of being independent due to numerous significant accounting scandals like WorldCom and Freddie Mac (Healy, 2009). With the implementation of the Sarbanes Oxley Act, auditors were obliged to follow many more rules.
Financial statements are an essential part of the relationship between businesses and customers, and competitors of those businesses. There are many costs associated with public financial disclosures. Financial reporting considers costs amounts large enough which can influence a user’s decision as material, however these determining these amounts can be subjective (Libby, Libby, & Short, 2014, p.231).
Given those three options, the board should have agreed to Deloitte & Touches’ request for the removal of CEO Joe King and CFO Diane Bullock to not give the appearance they influenced the financial reporting or internal controls in any way (Healy, 2009), instead of replacing the audit firm with another (Two, 2004). Since the board are the ones who select the CEO and CFO, they also should develop a better framework for selecting executive officers to avoid this mistake again.
Healy, P. M. (2009, July 29). Financial reporting problems at Molex, Inc. (A). HBP No. 9-102-039. Boston, MA: Harvard Business School Publishing.
Libby, R., Libby, P. A., & Short, D. G. (2014). Financial accounting (8th ed.). New York, NY: McGraw-Hill/Irwin.
Question #2: Suppose for a moment that you are the Chief Auditor for a team of independent auditors for a large multinational. What is your greatest worry (nightmare scenario)? What do you do to try to prevent it?
How do those concerns impact your relationship with the board of directors and the senior management team? What would you NOT want to do?
Please reply to: Patrice
If am a chief auditor for a team of independent auditors for a large multinational. What is the greatest worry? What do you do to try to prevent it?
Large companies today operate in multi countries. As chief auditor, my biggest fear would be independent of team members in a complex society. Independency of team members would affect the quality of the audit. The Sarbanes-Oxley Act (SOX) created the Public Company Accounting Oversight Board(PCAOB) to oversee audits of public companies PCAOB, n.d). I will prevent the issue by setting guidelines and safeguard placements to specify rules and regulations of violators and keep communication channels open for discussion forums.
How do those concerns impact your relationship with the board of directors and the senior management team? What would you not want to do?
Trust is very important in the CFO, board and management team within an organization. The board and managers rely on the CFO for effective leadership, manage financial issues, and avoid the issues that cannot be corrected. I would not want to be an ineffective CFO nor would I want to be unprepared in team meetings.
PCAOB(2016). PCAOB proposes to strength requirements fro auditor supervisor of other auditors. Retrieved from https://pcaobus.org/News/Releases/Pages/PCAOB-proposal-other-auditors-4-12-16.aspx (Links to an external site.)Links to an external site.
PCAOB (n.d). Standards. Retrieved from https://pcaobus.org/Standards (Links to an external site.)Links to an external site.
Risk and compliance Journal (2017). The CFO and audit committee: building and effective relationship. Deloitte. The Wall Street Journal. Retrieved from http://deloitte.wsj.com/riskandcompliance/2017/08/23/the-cfo-and-the-audit-committee-building-an-effective-relationship/ (Links to an external site.)Links to an external site.