Scenario: Accounting You are an accounting manager for a publicly traded company, Oscar Brands, Inc., a manufacturer of solar panels. During a department meeting, you learned that the Securities and Exchange Commission recently fined Oscar Brands $12.5 million and its former chief financial officer, Simon Tricher, $110,000 for misleading investors over financial-accounting practices. Simon Tricher was the CFO of Oscar Brands for five years and left the company three years ago. According to the SEC, after Tricher learned that the company was projecting unexpected losses for the quarter, Tricher issued an instruction to "scrub" the company's accruals and pull sales forward into earlier quarters. These practices occurred three years ago and diverged from generally accepted accounting principles. Tricher was an intimidating leader and often threatened to fire employees if they didn't "do as" he asked. He also demanded that he have unrestricted access to all software programs, including the accounting systems. His compensation was tied to the company's performance, and it was common knowledge that he lived an extravagant and luxurious lifestyle. After Tricher's actions were discovered, the company disclosed a material weakness in the internal control over its financial reporting in the company's next SEC financial reports. No current executive officers were named in the SEC complaint, and the SEC noted the company cooperated in the investigation and subsequently made improvements to its financial controls. After the discovery of Tricher's actions, the company fired Tricher and all accounting personnel involved in the scrubbing. The company also established a whistleblower program, hired an independent public accounting firm to review and improve the company's internal controls, and established a formal code of ethics that must be signed by all employees and leadership. In the company's most recent 10-K, management concluded that the company's current internal control over financial reporting is effective. Additionally, Oscar Brand's public accounting firm, Ernst & Young LLP, audited the financial statements and confirmed, with reasonable assurance, that the consolidated financial statements were free of material misstatement due to error or fraud and that effective internal control over financial reporting was maintained. You are concerned that news of the recent SEC penalty will reflect poorly on both the company and the accounting department even though those involved in the violation are no longer with the company. The public relations department has asked that you help draft a press release acknowledging the penalty and highlighting the changes made since the violation occurred. The subject matter is not something they are used to writing about, and they want to utilize your expertise on the issue. Overview: You have been asked to write a draft press release to be reviewed by the public relations (PR) department, based on a recent SEC penalty incurred by the company. Directions: Read the full scenario provided in the Supporting Materials section to write draft press release summarizing the violation and corrective measures so that the public will continue to trust Oscar Brands after a recent fine by the SEC. Prepare an email to send the draft press release to the PR department so they can review it and update it for the company website. Specifically, you must address the following rubric criteria: 1. Explain why it is important to manage public perception in the aftermath of the scandal in this scenario. 2. Explain how professional accountants have a duty to the public interest. 3. Summarize the violation and current situation. 4. Explain how leadership styles and ethics can potentially allow for accounting ethics violations related to this scenario. 5. Describe corrective measures taken by the company. 6. Explain why investors can trust the company and their financial statements.

Scenario: Accounting You are an accounting manager for a publicly traded company, Oscar Brands, Inc., a manufacturer of solar panels. During a department meeting, you learned that the Securities and Exchange Commission recently fined Oscar Brands $12.5 million and its former chief financial officer, Simon Tricher, $110,000 for misleading investors over financial-accounting practices. Simon Tricher was the CFO of Oscar Brands for five years and left the company three years ago. According to the SEC, after Tricher learned that the company was projecting unexpected losses for the quarter, Tricher issued an instruction to "scrub" the company's accruals and pull sales forward into earlier quarters. These practices occurred three years ago and diverged from generally accepted accounting principles. Tricher was an intimidating leader and often threatened to fire employees if they didn't "do as" he asked. He also demanded that he have unrestricted access to all software programs, including the accounting systems. His compensation was tied to the company's performance, and it was common knowledge that he lived an extravagant and luxurious lifestyle. After Tricher's actions were discovered, the company disclosed a material weakness in the internal control over its financial reporting in the company's next SEC financial reports. No current executive officers were named in the SEC complaint, and the SEC noted the company cooperated in the investigation and subsequently made improvements to its financial controls. After the discovery of Tricher's actions, the company fired Tricher and all accounting personnel involved in the scrubbing. The company also established a whistleblower program, hired an independent public accounting firm to review and improve the company's internal controls, and established a formal code of ethics that must be signed by all employees and leadership. In the company's most recent 10-K, management concluded that the company's current internal control over financial reporting is effective. Additionally, Oscar Brand's public accounting firm, Ernst & Young LLP, audited the financial statements and confirmed, with reasonable assurance, that the consolidated financial statements were free of material misstatement due to error or fraud and that effective internal control over financial reporting was maintained. You are concerned that news of the recent SEC penalty will reflect poorly on both the company and the accounting department even though those involved in the violation are no longer with the company. The public relations department has asked that you help draft a press release acknowledging the penalty and highlighting the changes made since the violation occurred. The subject matter is not something they are used to writing about, and they want to utilize your expertise on the issue. Overview: You have been asked to write a draft press release to be reviewed by the public relations (PR) department, based on a recent SEC penalty incurred by the company. Directions: Read the full scenario provided in the Supporting Materials section to write draft press release summarizing the violation and corrective measures so that the public will continue to trust Oscar Brands after a recent fine by the SEC. Prepare an email to send the draft press release to the PR department so they can review it and update it for the company website. Specifically, you must address the following rubric criteria: 1. Explain why it is important to manage public perception in the aftermath of the scandal in this scenario. 2. Explain how professional accountants have a duty to the public interest. 3. Summarize the violation and current situation. 4. Explain how leadership styles and ethics can potentially allow for accounting ethics violations related to this scenario. 5. Describe corrective measures taken by the company. 6. Explain why investors can trust the company and their financial statements.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter7: Fixed Assets, Natural Resources, And Intangible Assets

Section: Chapter Questions

Problem 7.6C

See similar textbooks

Related questions

Question

Help me out

Transcribed Image Text:Scenario: Accounting You are an accounting manager for a publicly traded company, Oscar Brands, Inc., a manufacturer of solar panels. During a department meeting, you learned that the Securities and Exchange Commission recently fined Oscar Brands $12.5 million and its former chief financial officer, Simon Tricher, $110,000 for misleading investors over financial-accounting practices. Simon Tricher was the CFO of Oscar Brands for five years and left the company three years ago. According to the SEC, after Tricher learned that the company was projecting unexpected losses for the quarter, Tricher issued an instruction to "scrub" the company's accruals and pull sales forward into earlier quarters. These practices occurred three years ago and diverged from generally accepted accounting principles. Tricher was an intimidating leader and often threatened to fire employees if they didn't "do as" he asked. He also demanded that he have unrestricted access to all software programs, including the accounting systems. His compensation was tied to the company's performance, and it was common knowledge that he lived an extravagant and luxurious lifestyle. After Tricher's actions were discovered, the company disclosed a material weakness in the internal control over its financial reporting in the company's next SEC financial reports. No current executive officers were named in the SEC complaint, and the SEC noted the company cooperated in the investigation and subsequently made improvements to its financial controls. After the discovery of Tricher's actions, the company fired Tricher and all accounting personnel involved in the scrubbing. The company also established a whistleblower program, hired an independent public accounting firm to review and improve the company's internal controls, and established a formal code of ethics that must be signed by all employees and leadership. In the company's most recent 10-K, management concluded that the company's current internal control over financial reporting is effective. Additionally, Oscar Brand's public accounting firm, Ernst & Young LLP, audited the financial statements and confirmed, with reasonable assurance, that the consolidated financial statements were free of material misstatement due to error or fraud and that effective internal control over financial reporting was maintained. You are concerned that news of the recent SEC penalty will reflect poorly on both the company and the accounting department even though those involved in the violation are no longer with the company. The public relations department has asked that you help draft a press release acknowledging the penalty and highlighting the changes made since the violation occurred. The subject matter is not something they are used to writing about, and they want to utilize your expertise on the issue. Overview: You have been asked to write a draft press release to be reviewed by the public relations (PR) department, based on a recent SEC penalty incurred by the company. Directions: Read the full scenario provided in the Supporting Materials section to write draft press release summarizing the violation and corrective measures so that the public will continue to trust Oscar Brands after a recent fine by the SEC. Prepare an email to send the draft press release to the PR department so they can review it and update it for the company website. Specifically, you must address the following rubric criteria: 1. Explain why it is important to manage public perception in the aftermath of the scandal in this scenario. 2. Explain how professional accountants have a duty to the public interest. 3. Summarize the violation and current situation. 4. Explain how leadership styles and ethics can potentially allow for accounting ethics violations related to this scenario. 5. Describe corrective measures taken by the company. 6. Explain why investors can trust the company and their financial statements.

Expert Solution

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here