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CASE 1.3 JAMAICA WATER PROPERTIES Synopsis This case focuses on David Sokol, an executive who has made a “name” for himself in recent years within the energy industries. After becoming recognized as a successful “turnaround” agent for troubled companies, Sokol was hired in 1992 to serve as the chief operating officer of JWP, Inc., a large, New York-based conglomerate. At the time, JWP had an impressive history of sustained profits and revenue growth that was being threatened by the company’s far-flung operations and unwieldy organizational structure. Unknown to Sokol, JWP’s impressive operating results over the prior few years had been embellished by the company’s…show more content…
During my courses, I frequently remind students that most corporate executives, accountants, and auditors are honest and ethical. This case provides a stark and powerful example of one such individual. When I discuss a case such as this in my courses, I try to provide other examples of positive role models among corporate executives. Granted, most of these examples do not involve accounting or auditing matters, but, nevertheless, they help to blunt the impression that students may receive from studying my cases that most corporate executives are “crooks.” 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


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