Royal Ahold Scandal

Revisions for the 7th edition by Eric D. Yordy, The W. A. Franke College of Business

CitedBrigham, Eugene F. , and Phillip R. Daves. Intermediate Financial Management. 8th ed. Mason: Thomson South-Western, 2004.

This solutions manual provides the answers to all the review questions and end-of-chapter problems in Financial Management: Principles and Practice, by Timothy Gallagher. The answers and the steps taken to obtain the answers are shown. Readers are reminded that in finance there is often more than one answer to a question or to a problem, depending on one‘s viewpoint and assumptions. One answer is

Keown, A. J., Martin, J. D., Petty, J., & Scott, D. F. (2005). _Financial management: principles and applications_ (10th ed.). Upper Saddle River, NJ: Pearson Education, Inc..

Prior to the advent of the Sarbanes-Oxley Act of 2002, referred to herein as “SOX,” the board of directors’ pivotal role was to advise senior leaders on the organization’s strategy, business model, and succession planning (Larcker, 2011, p. 3). Additionally, the board had the responsibility for risk management identification and risk mitigation oversight, determining executive benefits, and approval of significant acquisitions (Larcker, 2011, p. 3). Furthermore, for many public organizations, audit committees existed before SOX and provided oversight of internal processes and controls. Melissa Maleske (2012) advised that the roles and responsibilities of the board were viewed “…from a perspective that the board serves management” (p. 2). In contrast, Maleske (2012) noted that SOX regulations altered the landscape “…to a perspective that management is working for the board” (p. 2). SOX expanded not only the duties of the board and the audit committee, but also the authority of these bodies (Maleske, 2012, p. 2).

The article is written to help readers gain a solid understanding the roles of corporate governance, both inside and outside the company. Its goal is simply to impart information, not make claims or arguments on its own. I will be judging it mainly on the sources gathered, numerous examples and explanations given and the overall effectiveness it possesses in effectively communicating its ideas.

Prior to 2002, there was very little oversight of accounting procedures. Auditors were not always independent and corporate government procedures and disclosure provisions were inadequate. Sometimes, executive compensation was tied to the stock of the company which created an incentive to manipulate the stock price by using fraudulent accounting practices to make it look like companies were making more money than they actually were. The Sarbanes-Oxley Act of 2002 was introduced because of the collapse of several major corporations due to these practices. This paper will

This paper was prepared for Financial Decision Making, MBU 652, Summer 2011, taught by Professor Howard S. Steed, PhD

This document is authorized for use only in Financial Management23 by Dr. Raj, at Institute of Management Technology - Dubai from January 2015 to July 2015.

Ehrhardt, M.C. & Brigham, E.F. (2011). Financial Management: Theory and Practice, Ed 13. Ohio: South-Western Cengage Learning.

1. Brigham, Eugene F. and Michael C. Ehrhardt. Financial Management Theory and Practice, 13th Edition, Thompson South-Western, ISBN-13# 978-14390-7809-9, ISBN-10#1-4390-7809-2

Financial Management Introduction = == == == ==

REFERENCES•Ross, S.A., Westerfield, R.W., Jaffe, J., Jordan, B.D. "Modern Financial Management". McGraw-Hill, Eighth Edition, (2008)•R.A. Brealey and S.C. Myers, "Principles of Corporate Finance", McGraw-Hill, Seventh Edition, (2003).

Brigham, Eugene F., and Joel F. Houston. Fundamentals of Financial Management. Thomson: South-Western Publishers, Eleventh Ed. 2007.

The purpose of this paper is to highlight the role of external auditing in promoting good corporate governance. The role of auditors has been emphasized after the pass of the Sarbanes-Oxley Act as a response to the accounting scandal of Enron. Even though auditors are hired and paid by the company, their role is not to represent or act in favor of the company, but to watch and investigate the company’s financials to protect the public from any material misstatements that can affect their decisions. As part of this role, the auditors assess the level of the company’s adherence to its own code of ethics.