Cardillo Travel System Inc. Prior to Cardillo Travel Systems, Inc. closing their doors the Security Exchange Commission (SEC) filed a suit against Cardillo Travel Systems, Inc. for the following reasons; making false representation to outside auditors; failing to maintain accurate financial records; failing to file prompt financial reports with the SEC; and violating the insider trading provisions of the federal securities laws. I will attempt to give explanations to previously mention SEC violations only with explaining which violations violated or was compliant of the AICPA’s Code of Professional Conduct. Arnold Walter Rognlien was a son of an Iowa preacher. He started his first business, auto parts distributor at the age of 33. He …show more content…
With these earnings he purchased the Icee USA, and flavored syrup drink mainly sold in K-Mart’s across the world. This acquisition along with the auto parts distributor company was under the private holding company Runglin, Co. (phonetic spelling of Rognlien). In 1984 Cardillo’s revenues surpassed $100 million with their operating expenses increasing rapidly. Cardillo recorded on their financial statements a loss of $1.5 million. Cardillo Travel System, obtained the services of Touché Ross as their auditing company. The supervisor over the audit, Helen Shepherd, notice a suspicious transaction between Cardillo Travel Systems and United Airlines. When she inquired more about the transaction the response from Cardillo was that it was an adjusting entry recovered in late June. Shepard contacted Ester Lawrence, Vice President, and was instructed to contact United Airlines to confirm transaction. The confirmation from United Airlines was that it was a refunded issued to Cardillo Travel Systems for reimbursement for installation expenses for a computerized reservation systems. Cardillo Travel Systems had …show more content…
(2) Recording financial transactions are governed by financial reporting standards and Cardillo was not following the proper accrual concept which states revenue should be recorded when earned and not necessarily when received. (3) After, the receipt of payment from United Airlines was recorded over a five year period with a footnote explaining the proper nature of the revenue, and how Cardillo misrepresented the financial records indicated that accurate records were not being maintained. In 1986, Cardillo Travel Systems was still facing financial troubles. Cardillo was ordered to pay $685,000 in a civil suit filed against the company. Raymond Riley informed Rognlien and Lawrence that is civil suit amount would alert the Securities Exchange Commission immediately and according to 10B-5 this information would deter potential
An implicit theme of this case that I want students to recognize is the contrast between the persistent and vigorous efforts of David Sokol to “get to the bottom” of the suspicious items he uncovered in JWP’s accounting records versus what Judge William Conner referred to as the “spinelessness” of JWP’s auditors. The JWP audits were similar to most problem audits in that the auditors encountered numerous red flags and questionable entries in the client’s accounting records but, for whatever reason, apparently failed to thoroughly investigate those items. On the other hand, Sokol refused to be deterred in his investigation of the troubling accounting issues that he discovered. The relationships that existed between members of JWP’s accounting staff and the Ernst & Young audit team apparently influenced the outcome of the JWP audits. Of course, the Sarbanes-Oxley Act of 2002
In accounting there is much to be learned, about the financial aspects of a business. In the past five weeks I have learned the importance of financial reports and how they relate to the success of an establishment. These reports may include balance sheets and income statements, which help accountants and the public grasp the overall financial condition of a company. The information in these reports is really significant to, managers, owners, employees, and investors. Managers of a business can take and deduce financial
The Enron and WorldCom scandals were arguably the incidents that permanently changed the procedures for accounting controls. In response to these incidents, the Sarbanes-Oxley Act (SOX) of 2002 was passed. Once the knowledge of these scandals was made public, a number of subsequent accounting scandals were discovered in public companies such as Tyco International, HealthSouth, and American Insurance Group. In addition, a then-employee-owned company, Post, Buckley, Schuh & Jernigan, Inc. (dba PBS&J, now known as “Atkins North America, Inc.”), was also hit by a similar accounting scandal. Henceforth, a case study of PBS&J is presented where we will examine the fraudulent transactions that
On an overcast afternoon in Portland, Oregon, on Friday, March 28, 2003, Richard Okumoto intently studied a set of hard-copy accounting documents called “adjusting journal entries” spread out on his desk. He had been appointed chief financial officer (CFO) of Electro Scientific Industries, Inc. (ESI), a multi-million dollar equipment manufacturer, just a few weeks earlier. Okumoto was in the midst of closing the company’s books for the third quarter of fiscal year 2003, which ended February 28. An experienced executive who had served as CFO for several other technology firms, Okumoto was familiar with the task, which normally would be routine. But this time, he
Fraser, L. M., & Ormiston, A. (201). Understanding financial statements (9th ed.). Upper Saddle River, NJ: Prentice Hall.
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Throughout history and in our own time, legitimate accounting methods have been utilized to fraudulently engage in manipulating activities that results in illicit gains to the perpetrators and losses to individuals and financial institutions.
In this paper I have defined accrual and cash basis accounting. Also, I have answered the following questions: Explain the difference between the accrual basis of accounting and the cash basis of accounting. What are the major reasons for using accrual accounting? What are the purpose of a journal and a ledger? Give an example of a contra-asset, and explain how it is recorded on the ledger as a transaction. Explain what a “prepaid expense” is and how it is recorded on the ledger as a transaction. What are the major differences in recording transactions for a for-profit organization versus a not-for-profit, or are there any? List and record each transaction
“In my opinion, the Case would be improved by including the following summary” An American agriculture of the nineteenth century Cyrus McCormick, invented a company that produced farming equipment called McCormick Harvesting Machine Company. In 1902 his son Cyrus McCormick II merged the company with three competitors renaming it the International Harvester Company. By the late 1980’s the company had moved from producing farming equipment to manufacturing automotive products, trucks, and school buses. In the late 1980’s International Harvester company was renamed Navistar International Corporation. Over the years NIC changed and one of the most dramatic changes was the relationship with its longtime auditor Deloitte. (Knapp, 2015)
This particular case, involving the SEC, Coopers & Lybrand, and California Micro Devices, Inc. encompasses charges for neglecting to comply with auditing standards. The Securities and Exchange Commission makes these charges against Michael Marrie, audit partner, and Brian Berry, manager, of Coopers & Lybrand. There are three main areas in which the auditing standards were not in compliance, a write-off of accounts receivable, confirmation of accounts receivable and sales returns and allowances. The Securities and Exchange Commission make these accusations against Michael and Brian for failure
Records falsification was not the only illegal activity the Rigas family was wrapped up in. The family used company funds, unbeknownst to their investors, to finance personal endevours and interests. Examples include using corporate money to build a $12.8 million golf course on the Rigas property, using the company plane for personal vacation trips including a safari to Africa, and funding for two Manhattan apartments for his family (Markon, 2014). Not only this, but John Rigas purportedly used the company jet to fly a Christmas tree two times to his daughter in New York (Barlaup, 2009)! All of these incidents are just brief excerpts of the fraud and misuse of company funds that John Rigas and his family committed without any intention of ever paying back into the company. These actions, namely lying and stealing, prove to be the heart of the two moral issues that will be further analyzed.
Accounting transactions are professional occasion that has either a positive or negative budgetary impact on the financial statements. One impact of transactions in a financial statement will increase or decrease the accounts contingent on the transaction that has taken place. The history of revenue that has come or gone from the business will be shown on both financial statements and accounting transactions. Many businesses make several transactions daily. Errors can have a negative impact on financial statements, because the facts come from the accounting transactions
Ethical and legal obligations apply to all members of society. As one in society, the obligation to act in an ethical, law abiding manner on a daily basis is vital to the integrity of daily life. Many professions have their own code of ethics. Financial reporting is not exempt from such ethical and legal standards. One’s lively hood depends on decisions made in the business world. Business transactions are done daily and can impact one’s economic stability. Trust is placed in the hands of corporate America and an obligation of financial reporting to reveal a complete honest and legal picture of an entity’s accounting practices is important in attaining trust. This paper will discuss the obligations of
The accounting practices at Carlton normally permit revenue recognition after the shipment of the computer systems. Peale, Gower and Quill, Carlton’s auditors, are worried about the accounting practices regarding revenue recognition of certain transactions during the
This research paper will explore the fraud at Tyco and focus primarily on accounting and auditing issues related to the fraud. One thing worth noting about this case is that fraudulent financial reporting was not at the core of the fraud, which was the case with majority other big frauds at the time, such as Enron and Waste Management. On the contrary, fraud consisted of misappropriation of assets, and fraudulent financial reporting came as a consequence of trying to hide misappropriation of assets and the use of corporate money for personal benefit.