Walmart Audit Fees

This $490 million came from the netting manipulation when they offset their expenses with unrelated gains on the sale of assets. The geography manipulation allowed them to move millions of dollars to different sections of the income statement to “make the financials look the way we want to show them” said James Koenig, one of the primary forces behind the scandal. However, none of the fraudulent activities would have gone unknown for so long without the aid of the auditors, Arthur Anderson LLP, involved with Waste Management.

Arthur Anderson Limited Liability Partnership (LLP) was established in 1913 into the Accounting industry. They offered tax, consulting, and, auditing services to large corporations everywhere. Their headquarters were located in Chicago, Illinois and eventually had over 85,000 employees in 84 different countries (Collins, 2016). By the 1990’s Arthur Andersen had become one of the largest accounting firms, and was recognized as one of the “big five.” Along with being one of the largest accounting firms Arthur Andersen was also one of the most reputable. There were many factors that distinguished Arthur Andersen from other accounting firms, and the most notable were the honesty and integrity Arthur Andersen had established for the company (Moore & Crampton, 2000). Andersen set high standards which in turn resulted in the growth of their prestige. Many companies came to Arthur Andersen because of the trust it had established in the public and in the accounting Industry. One of the ways Arthur Andersen established their reputation was through their organizational structure and the culture of the company.

The auditing firm Coopers & Lybrand was accused of failing to perform a proper GAAS audit. One strategy the auditors could have performed was to follow the trail of revenue vs expenses. The auditor should have notice large sums ($10 million) of revenue going into one particular expense (Suppliers/Inventory). Considering Phar-Mor filed that they lost money in fiscal year 1984 and 1985 and they never cleared

In addition, associated with the misapplication of accounting methods, the financial industry has been plagued with one disaster after another involving numerous scandals from top leading American companies. Consequently, the Sarbanes-Oxley Act was passed in 2002 compromising eleven sections that are generated to insure the responsibilities of the company’s managers and executives. This act identifies criminal penalties for particular unethical practices and currently has new policies that a corporation must follow in their financial reporting. The following examples describe some of biggest accounting methods as a result of the greed and the outrage of the ethical and financial misconduct by the senior management of public corporations.

Difficult to locate the fees by the auditors (more difficult than #2 because doesn’t increase the price as much)

3) What was the prime motivation behind the decisions of Arthur Andersen’s audit partners of the Enron, WorldCom, Waste Management and Sunbeam UDITS: Cite examples that reveal this motivation?

executives were accused of overstating revenue from software licenses in collusion with executives from PurchasePro Inc.AOL sold the software licenses for PurchasePro. The parties were accused of deceptive accounting practices that resulted in investors believing that the sales projections of PurchasePro had been met when they had not and the result was that the stock prices of PurchasePro were inflated and overstated by 37% in the first quarter of 2001. Out of court settlements were reached by AOL and executives including a $210 million fine in order to avoid being criminally and civilly prosecuted. The defendants in this case who did not accept plea agreements were found to be 'not guilty' and this is stated to be due to the lack of documentation of what had occurred on AOL's networking and computer systems.

Andersen – Although Enron committed the fraud, Andersen allowed Enron to get away with it. An audit firm has to be independent from their client and act in the best interest of the public. For this reason, I think that Andersen was the most responsible for the Enron crisis. Andersen could have declined continuing their relationship with Enron as their client, considering some Andersen representatives did not agree with Enron’s “aggressive” accounting and financial reporting decisions in the early months of 2001. Andersen also assisted Enron in restructuring some of the SPEs so they would still be considered unconsolidated entities. Andersen not only audited Enron, but they also went beyond the scope of what the quality audit should entail. It was also telling when personnel in the Houston office destroyed documents related to Enron and

As laws and regulations continue to grow and become more complex, the need for forensic accountants is sure to continue growing as well. An example of how regulations have grown (mirroring the demand for forensic accountants) can be seen by comparing the scope and length of the Sarbanes-Oxley Act of 2002, at 66 pages, to the 849 page Dodd-Frank Wall Street Reform and Consumer Protection act of 2009.(Tucker, 2011) It is the environment created by such complex regulations and oversight committees that has hedged the need for accounting experts who can help demonstrate both the effects of individual companies on overall markets, as well as the opposite effects of market-happenings on individual firms. This complicated data, made comprehendible by a talented and effective forensic accountant, can serve as the determining factor in a case. Ultimately, this allows for

The company’s main concern is the public interest, but also obtaining benefits from it. This company has a mission to impact the low-income society by providing unique services. The company’s goal is to be successful by doing good to the community. In the case of the tax returns, this strategy is presented in a way that customers believe they have an option that will allow them to obtain the tax returns without having to pay a large fee. “About 9.6 million households had no bank account in 2013, according to a survey by the Federal Deposit Insurance Corporation”(Brandeisky, 2015). Walmart found an opportunity to increase their profit by providing this new system called “Direct2Cash”. The method Walmart will gain some profit out of

The auditing firm has been in engagement with the company throughout the period when the fraud was being committed. One of the common and clear indicators of possible fraud was the company’s cash flow statement. The company experienced positive growth in its profits from the year 1996 through to the year 1998. However, a close analysis of the cash flow statement shows that the company had experienced negative figures of cash flow from both operating and investing activities and positive cash flow from financing activities which would not sufficiently offset the negative cash flows from operating and investing. It is therefore evident

After analyzing Wal-Mart’s annual report for 2010, attention has been brought to several items that require closer examination. A common “red flag” to questionable accounting has been found within Wal-Mart’s statement of cash flows and income statement. There is an increasing gap between the company’s reported income and the cash flow from operating activities. In the year 2008 reported income and cash flow from operating activities differed by $484 million. However the difference increased a considerable $2,249 and $4,183 billion in the years 2009 and 2010 respectively. This increasing gap is a significant warning sign that the company may be changing accrual estimates.

“Audit committee members or their agents may proactively examine areas, functions, and personnel where collusive fraud risk is reasonably likely to be perpetrated,” (Zmags). The search for fraud, even if performed in the same location multiple times, may continue until the audit committee feels confident that they have ruled out the probability that fraud is prevalent. One of the biggest risks of fraud is management override of controls, requiring the extensive search for risk in, “journal entries and other adjustments and reviewing accounting estimates for possible biases that could result in material misstatements,” (Nysscpa).

Deloitte Touche Tohmatsu Limited, also branded as “Deloitte”, is the largest private professional services organization in the world. It has almost 170,000 staff over 150 countries. Deloitte mainly delivers audit, tax, consulting, enterprise risk and financial advisory services. In the mid of 19th century, Deloitte started its business earlier than any other competitors in the professional services industry. Deloitte is now also famous for its accounting area which is one of the four largest audit company in the world. Compare to other famous consulting company like McKinsey & Company and Boston Consulting Group, Deloitte’s consulting has lower risks. The reason is they focus on

Assigned auditors were more than aware of the accounting misrepresentation of financial statements, overstating net income. Still instead of walking away from the client and resign, Andersen in pursuing short-term goals stayed with the company and moreover played by the Giant’s rules. More and more accounting firms at that time started to provide consulting services along with auditing to the same companies which always indicates a conflict of interests. Auditors are the guardians and rules players where consultants are giving advices and showing how to avoid some accounting oversights. Andersen also in order to make good profits stepped on the side of combining two contradicting to each other services. Waste Management had lots of former Arthur Andersen employees which also led to close ties between two companies. That situation undoubtedly led to inability to turn down fraudulent accounting practices Waste Management was exercising at that time for a long period of time.