4.99 See Answer

Question: Ahold is a publicly held company organized


Ahold is a publicly held company organized in the Netherlands with securities registered with the SEC pursuant to Section 12(B) of the Exchange Act. Ahold’s securities trade on the NYSE and are evidenced by American Depositary Receipts (ADRs). Today its common shares are sold on NYSE Euronext.
As a foreign issuer, Ahold prepared its financial statements pursuant to Dutch accounting rules and included, in its filings with the commission, a reconciliation to U.S. GAAP and condensed financial statements prepared pursuant to U.S. GAAP. Those were the rules at that time. However, today foreign companies listed on U.S. stock exchanges are allowed to submit their financial statements to the U.S. SEC using International Financial Reporting Standards (IFRS).
U.S. Foodservice (USF), a food service and distribution company with headquarters in Columbia, Maryland, is a wholly owned subsidiary of Ahold. USF was a publicly held company with securities registered with the SEC pursuant to Section 12(B) of the Exchange Act prior to being acquired by Ahold in April 2000.
Summary of the Charges against Ahold
On October 13, 2004, the SEC charged Royal Ahold N.V. (Ahold) with multiple violations of Section 17(A) of the Securities Act, Section 10(B) of the Exchange Act, and Exchange Act Rule 10(B-5). Charges were also filed against three former top executives: Cees van der Hoeven, the former CEO and chair of the executive board; A. Michael Meurs, the former CFO and executive board member; and Jan Andreae, the former executive vice president and executive board member. The commission also filed a related administrative action charging Roland Fahlin, a former member of Ahold’s supervisory board and audit committee, with causing violations of the reporting, books and records, and internal control provisions of the securities laws.
As a result of two frauds and other accounting errors and irregularities that are described in the following text, Ahold made materially false and misleading statements in SEC filings and in other public statements for at least fiscal years 1999 through 2001 and for the first three quarters of 2002. The company failed to adhere to the requirements of the Exchange Act and related rules that require each issuer of registered securities to make and keep books, records, and accounts that, in reasonable detail, accurately and fairly reflect the business of the issuer. The company also failed to devise and maintain a system of internal controls sufficient to provide reasonable assurances that, among other things, transactions are recorded as necessary to permit preparation of financial statements and to maintain the accountability of accounts.
The SEC’s complaints, filed in the U.S. District Court for the District of Columbia, alleged that, as a result of the fraudulent inflation of promotional allowances at USF, the improper consolidation of joint ventures through fraudulent side letters, and other accounting errors and irregularities, Ahold’s original SEC filings for at least fiscal years 2000 through 2002 were materially false and misleading. For fiscal years 2000 through 2002, Ahold overstated net sales by approximately $30 billion. Ahold overstated its operating income and………………………..
1. Evaluate the facts and circumstances of the case using the Fraud Triangle. Discuss how auditors perform an audit and assess risk when red flags exist that the financial statements may be materially misstated.
2. Evaluate the role of Deloitte from the perspective of professional judgment by referring to the discussions in Chapters 4 and 5. Do you think Deloitte compromised its professional responsibilities in accepting evidence and explanations provided by the client for the joint venture and promotional allowance transactions? Explain.
3. The court ruled that Deloitte was not responsible for the fraud at Ahold because its management deceived the auditors and hid information from the firm. Do you think Deloitte compromised its ethical responsibilities in this case? Identify any such deficiencies and why you believe compromises existed.



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> Lance Popperson woke up in a sweat, with an anxiety attack coming on. Popperson popped two anti-anxiety pills, laid down to try and sleep for the third time that night, and thought once again about his dilemma. Popperson is an associate with the accounti

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> How does the nature of the internal audit function, strength of ethical leadership, and level of moral intensity influence whether an auditor will record questionable and undocumented journal entries?

> Describe the role of professional judgment in ethical leadership as it pertains to accountants and auditors.

> How might moral intensity influence the decisions made by accounting professionals?

> Why is it important for a CPA to promote professional services in an ethical manner? Do you believe it would be ethical for a CPA to advertise professional services using testimonials and endorsements? Why or why not?

> Are accountants and auditors moral agents of corporations and society? Explain.

> Values-driven leadership as envisioned in the Giving Voice to Values technique poses the following question: Once I know what is right, how do I get it done and get it done effectively? Discuss how an authentic leader would go about addressing this quest

> Identify three reasons why there may be ethical leadership failures and explain why failed leadership occurs.

> Distinguish between authentic leadership, transformational leadership, and servant leadership. Are all necessary to change individuals and social systems within an organization?

> The American writer, Robert McKee, is quoted as saying, “True character is revealed in the choices a human being makes under pressure.” Explain what you think this means in the context of moral intensity and ethical leadership of organizations.

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> Moral legitimacy refers to the generalized perception or assumption of observers that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, and beliefs. Explain how moral legitimacy might

> Bruns and Merchant found that managers did not agree on the types of earnings management activities that are acceptable. Refer to the definitions of earnings management in Chapter 7. Explain how leadership traits influence how managers might perceive the

> What is the role of leadership in auditor assessments of the likelihood of fraud in the context of the fraud triangle?

> Explain how the circumstances under each of the following might reflect failed leadership by auditors and the audit firm: • Under-reporting of time on an engagement • Premature sign-off on audit procedures • Accepting weak client explanations for account

> Using the concept of justice, evaluate how an auditor would assess the equality of interests in the financial reporting process.

> Audit firms are expected to establish and maintain a system of quality control. PCAOB inspections often cite the lack of quality controls as a deficiency of audit firms. What role does leadership play in developing the kind of quality control system that

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> How does organizational dissonance influence ethical leadership and decision making?

> Evaluate the moral intensity of the issues faced by Diem-Thi Le in her whistleblowing experience at DCAA.

> How does an auditor’s commitment to the firm, the profession, and to colleagues influence whether she will blow the whistle on financial wrongdoing?

> How might an accounting firm influence whether non–tax practitioners view a contentious issue with a client as having been handled ethically?

> Choose someone from the business or accounting world who you think is an authentic leader and explain why you believe that to be true.

> Comment on the statement that what a company’s income statement reveals is interesting but what it conceals is vital.

> In 2010 LinkedIn reported trade payable obligations totaling $10.8 million in other accrued expenses within accrued liabilities instead of accounts payable. In 2011, note 2 in the 10-K financial statements described the use of accrued liabilities instead

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> Distinguish between ethical rights and obligations from the perspective of accountants and auditors.

> Comment on the statement that materiality is in the eye of the beholder. How does this statement relate to the discussion in the chapter of how to gauge materiality in assessing financial statement restatements? Is materiality inconsistent with the notio

> Evaluate the following statements from an ethical perspective: “Earnings management in a narrow sense is the behavior of management to play with the discretionary accrual component to determine high or low earnings.” “Earnings are potentially managed, be

> Evaluate earnings management from a utilitarian perspective. Can earnings management be an ethical practice? Discuss why or why not.

4.99

See Answer