In November 1985, Cardillo had credited some transaction of $203, 210 as an adjusting entry and had been considered as commission received from United Airlines. Yet in the agreement between United Airlines and Cardillo, that amount of money was refundable through 1990 if some stipulations in the agreement were violated. Vice president Lawrence and Chief Executive Officer (CEO) Walter Rognlien insisted that the entry was correct and the disputable amount that had been recorded as commission earned was not refundable in any circumstances. When Shepherd contacted United Airlines’ management they confirmed that actually that amount is refundable if terms of the contractual agreement are violated.
Cardillo recorded $203, 000 amount as revenue earned …show more content…
When she inquires about the transaction she is told there existed a private arrangement superseding agreement terms and therefore she is to stop questioning that transaction. This is a clear interference with the independence of an auditor. Furthermore, William Kaye, Cardillo’s vice president of finance is directed by Lawrence the company’s vice president had issued directive to record payment as commission revenue and refuses to make appropriate adjustments regarding the entry. This interferes with independence of auditor and …show more content…
This is a good indicator that the auditing officers in charge was keenly doing his work and as such could not allow an errant entry to be considered. The auditor goes ahead to seek clarification from top management about the claimed commission revenue from United Airlines. The CEO, Rognlien doesn’t give a satisfactory answer prompting her to inquire from United Airlines’ top management. Having obtained the full information regarding the agreement, Hellen advices William Kaye to make appropriate adjustments to the entry. This to me shows a high level of professionalism in audit risk management and further portrays Touche Ross as a competent and non compromised audit firm. KMG Main Hurdman (KMG) addresses the accounting treatment regarding payment by United Airlines and they too refused the explanation given to them by Rognlien and Lawrence. The explanation was that there was a private arrangement which superseded the formal contractual arrangement. After press release Roger Shlonsky informs CEO Rognlien and Lawrence that press release understated Cardillo’s estimated loss for fiscal year 1985 and shortly after that KMG resigns. This implies that KMG as an audit firm does not comply with false information about financial situation of a company, which led to its resignation as Cardillo’s independent audit
Cardillo recorded $203, 000 amount as revenue earned …show more content…
When she inquires about the transaction she is told there existed a private arrangement superseding agreement terms and therefore she is to stop questioning that transaction. This is a clear interference with the independence of an auditor. Furthermore, William Kaye, Cardillo’s vice president of finance is directed by Lawrence the company’s vice president had issued directive to record payment as commission revenue and refuses to make appropriate adjustments regarding the entry. This interferes with independence of auditor and …show more content…
This is a good indicator that the auditing officers in charge was keenly doing his work and as such could not allow an errant entry to be considered. The auditor goes ahead to seek clarification from top management about the claimed commission revenue from United Airlines. The CEO, Rognlien doesn’t give a satisfactory answer prompting her to inquire from United Airlines’ top management. Having obtained the full information regarding the agreement, Hellen advices William Kaye to make appropriate adjustments to the entry. This to me shows a high level of professionalism in audit risk management and further portrays Touche Ross as a competent and non compromised audit firm. KMG Main Hurdman (KMG) addresses the accounting treatment regarding payment by United Airlines and they too refused the explanation given to them by Rognlien and Lawrence. The explanation was that there was a private arrangement which superseded the formal contractual arrangement. After press release Roger Shlonsky informs CEO Rognlien and Lawrence that press release understated Cardillo’s estimated loss for fiscal year 1985 and shortly after that KMG resigns. This implies that KMG as an audit firm does not comply with false information about financial situation of a company, which led to its resignation as Cardillo’s independent audit