The Molex Inc Case Study

1227 Words Nov 4th, 2013 5 Pages
Introduction

The Molex Corporation is an electronic connector manufacturing firm, which is based in Illinois. This company is facing a financial reporting problem in which the financial statements were overstated. Joe King ,the CEO of the company, was appointed in July of 2001, and was responsible for managing and inventory control, among other very important duties. Diane Bullock was hired in 2003, to replace the previous CFO. Both Bullock and King were being accused of what? by the external auditors, Deloitte & Touche, for not disclosing an 8 million pre-tax inventory valuation error.
Financial reporting Problem

The financial reporting problem at Molex was that, “the profit on inventory sales that the company made between its
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The error would’ve been correct on the current period first quarter results. To correct the overstatement of 8 million in inventory, a credit or decrease for $8 mill should’ve been done on the inventory account, and the retained earnings should’ve been debited for the same amount:
Retained Earnings…………………………………………$8,000,000
Inventory……………………………………………………………………. $8,000,000
When an error of overstatement like this one happens, the financial statements have to be restated in order(ed) to bring net income to the correct amount. The Cost of goods sold should’ve been increased by $8 million and the same

$8 mill needed to be deducted from net income on the income statement. They should have followed (Following) with disclosure notes to describe why this error occurred and how it impacted the statement and accounts that it touched. For instance, the notes would describe the presence of the correction on the current period of beginning inventory, and retainED earnings.
Role of Top Management, The Audit committee and The External Auditor in Financial Reporting

The audit committee’s role in financial reporting is to ensure that accurate and transparent disclosure is being presented to the public, investors, and shareholders. The role of top management in financial reporting is to make sure that the financial statements and disclosures are in accordance to GAAP, and that everything disclosed is truthful, while not hurting the business. The

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