Waste Management Case Analysis Essay

1425 Words Sep 22nd, 2010 6 Pages
1. Based on the fraud triangle, there are several factors present at Waste Management that are indicative of each of the three fraud conditions.

Incentives: from the case, the SEC staff claimed that the top Waste Management officers’ fraudulent conduct was driven by greed and a desire to retain their corporate positions and status in the business and social communities. Their bonuses, retirement benefits and stock options closely correlate with the performance of the company. If the company meets predetermined earnings targets, those top managements will earn a lot from profit sharing. Furthermore, aside from money, those people can maintain their high social status by constantly using those ill-gotten gains to contribute to
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4. Based on the AU Section 342.04, the auditor is responsible for evaluation the reasonableness of accounting estimates made by management in the context of the financial statements taken as a whole. The auditors should consider, with an attitude of professional skepticism, both the subjective and objective factors of the estimates. Also, based on article .07, the auditor’s responsibilities when evaluating accounting estimates is to obtain sufficient appropriate audit evidence to provide reasonable assurance that

a. All accounting estimates that could be material to the financial statements have been developed.

b. Those accounting estimates are reasonable in the circumstances.

c. The accounting estimates are presented in conformity with applicable accounting principles and are properly disclosed.

As to evaluate the reasonableness of an estimate, based on the article .10, techniques commonly used by auditors are shown as follows:

a. Review and test the process used by management to develop the estimate.

b. Develop and independent expectation of the estimate to corroborate the reasonableness of management’s estimate.

c. Review subsequent events or transactions occurring prior to the date of the auditor’s report.

5. To evaluate the reasonableness of estimate of salvage

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