Class 15 Integrating Values w/ Actions in the Workplace Flashcards Preview

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Flashcards in Class 15 Integrating Values w/ Actions in the Workplace Deck (12)
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1

What was the financial reporting problem at Molex?

CEO and CFO failed to disclose an $8 million pre-tax inventory valuation error

2

What did the original auditors think Molex should do to correct the financial reporting problem?

Book the entire $8 million up front

3

What did the CFO think Molex should do to correct the financial reporting problem?

Bleed it in over the four quarters

4

What factors do you think influenced management's decision not to raise the issue with auditors?

Booking the error would have cause Molex to miss analyst expectations

5

Why were Molex's auditors so concerned about the reporting problem at Molex?

- AA engagement partner
- AA senior manager
- Both just saw firm collapse b/c auditors were caving into clients

6

Did the BOD agree with the external auditor's concerns?

- BOD though Deloitte was overreacting
- BOD didn't want anything to do w/ the matter and told auditors to deal with it on own

7

How did the Molex BOD respond to Deloitte's request that the CFO (and possibly the CEO) be replaced?

- Replaced Deloitte with EY

8

Why was Deloitte hesitant to act in the beginning?

- Molex = top 25 audit client
- Losing a top 25 audit client would have a financial ripple effect on the firm

9

Was the $8 million error material?

- Yes
- Material b/c it would cause company to miss analyst expectations if entire $8 million booked up front

10

Did the CFO eventually book the $8 million?

- Yes
- "Adjustments" booked but bottom line didn't change at all

11

After the investigation, what did Deloitte decide to do?

Walk

12

What did EY do before taking Molex on as a client?

- Conversed w/ Deloitte (that Deloitte would walk from really profitable audit raises a red flag)
- Asked that CFO be replaced
- Asked that audit committee find a financial expert